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Euro FX Futures (Oct 2024)Euro FX Futures (Oct 2024)Euro FX Futures (Oct 2024)

Euro FX Futures (Oct 2024)

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6EV2024 trade ideas

Event-Driven Trade Setup for Novel TradersCME: Euro FX ( CME:6E1! ), NYMEX: WTI ( NYMEX:CL1! ) Since I joined the TradingView community two years ago, I have discussed numerous trade ideas based on event-driven strategies. Below is my all-time favorite. Russia and Ukraine together account for 28% of the wheat export market. Their military conflict started in February 2022 threatened global wheat supply, pushing wheat prices up by 75% within weeks. On June 22th 2022, I experimented a Long Straddle Options Strategy on CBOT Wheat Futures in this TradingView commentary • Viewing geopolitical crisis as a market moving event, I categorized its future outcomes as binomial, being “Risk On” or “Risk Off”. • Call options on Wheat futures would gain in value if the conflict escalated, where Put options would profit in a cease-fire scenario. Today, let’s take a look at two event-driven trades I have crafted, followed by a step-by-step guide to set up the hypothetical trade. First case: On May 27th, I posted “Event-Driven Strategy using WTI Weekly Options”. • Using the June 2nd OPEC+ meeting as a market moving event, I considered the outcomes binomial, being “Within Expectation” and “Exceeded Expectation”. • CME Group OPEC Watch Tool indicated a high probability of the OPEC+ maintaining its output quotas. This was the prevailing market expectation. I expected the crude oil market to react calmly if OPEC+ made no changes. To express this view, I experimented simultaneously selling an Out-of-the-Money (OTC) Call and an OTC Put Options on WTI crude oil futures ( NYSE:CL ). The trader would deposit $6,001 margin and collect $460 premium upfront. These weekly options expired in 12 days on June 7th. • OPEC+ made no changes in output level on June 2nd. • During the duration of the options contracts, oil prices never went above our call strike of 82.8 or dipped below our put strike of 72.8. • After market close on June 7th, the clearing house would release the margin back to the trader, as the options he sold expired worthless. • The $460 premium the trader collected upfront became the profit of this trade. Second case: On June 12th, I posted “Euro to Weaken as the ECB Pushes Rate Cuts Forward”. Based on the Interest Rate Parity (IRP) theory, the interest rate spread between the US Fed Fund rates and the European Central Bank key rates is considered the main driver for Euro-USD exchange rate. Each Fed meeting and the ECB rate setting meeting will be market moving events, which will influence the relative value of the Euro against the Dollar. In my opinion, the ECB will cut rates more frequently than its US counterparts, leading the Euro depreciation. To express this view, I propose to Short the Euro-FX futures. • On June 12th, the September (6EU4) Euro-FX contract quoted 1.08605. Each contract has a notional value of €125,000. CME requires an initial margin of $2,100. • On June 12th, the Fed decided to keep the Fed Funds rate unchanged at 5.25%-5.50%. • On June 16th, 6EU4 is quoted at 1.07465. The 114-pip drop in Euro futures price will translate into a gain of $1,425 (= 114 x $12.5) in the short position. The next ECB Governing Council meeting is on July 18th. The next Fed meeting is on July 31st. CME Group FedWatch Tool shows an 87.6% probability of the Fed keeping interest rate unchanged. If the ECB continues to cut rates, I expect the Euro to fall further. Event-Driven Trade Setup for Novel Traders Firstly, find a major event with a magnitude to move the global market. Examples are Fed and ECB rate-setting meetings, releases of US CPI data and nonfarm payroll reports, OPEC+ meeting, the US-China trade conflict, the COVID pandemic, and the Russia-Ukraine conflict. Secondly, analyze the event impact and define it into binary outcomes. These outcomes must be mutually exclusive and collectively exhaustive (MECE). Examples: • The 2022 US Mid-term election: House controlled by Republican or Democrats. • The 2023 Debt ceiling crisis: Resolved or Not Resolve. • Spot Bitcoin ETF: SEC approval or denial. • The trial of the former US president: Guilty or Not Guilty. If there are too many outcomes, it would be difficult to construct a trading strategy. Take the 2024 US presidential election as an example, it has two possible outcomes: Democrat Win or Republican Win. Thirdly, search and identify financial instruments that are most affected by the event. For example, ECB meeting to Euro-USD exchange rate, OPEC+ meeting to WTI crude oil, Fed meeting to US stock market indexes. If market prices did not respond to event outcomes, then this is not the right instrument to use. Finally, set up the trade. • In a scenario where one outcome pushes the prices up and the other outcome drags the prices down, we could consider Long Futures or Call Options to express a bullish view. Similarly, Short Futures or Put Options position would signify a bearish view. • Futures and options come with leverage. They are a capital efficient way to invest. • In a different scenario, one outcome would increase short-term market volatility, but the other outcome will be received by muted reaction. In the latter, if we expect the market to move sideways, we could sell short-dated options to collect premium income. For our discussion in the next week: The first US presidential debate will be held on CNN on June 27th. This is a major event as the candidates’ performance will play a big role into voters’ decisions in November. Now I have a question for my readers: What financial instruments would be impacted the most by the debate? Specifically, what prices would go up for a perceived win by former President Trump, and what would fall if the approval rate rose for President Biden after the debate? Please leave your comments below. Thanks in advance for your support. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME:6E1!Short
by JimHuangChicago
Euro to Weaken as the ECB Pushes Rate Cuts ForwardCME: Euro FX ( CME:6E1! ) On June 6th, the Governing Council of the European Central Bank (ECB) cut the official Interest Rate on the Deposit Facility by 25 basis points from 4.00% to 3.75%. This was the first ECB key rate reduction in five years, signaling a major shift in monetary policies in the 20-nation Euro Zone. The ECB rate decision was widely anticipated and has already been priced in the financial markets. On June 7th, the Euro-USD exchange rate was unchanged at $1.080 per Euro. The US Dollar Index edged up 0.83 points to settled at 104.94. In my opinion, the ramifications of ECB rate cuts are underappreciated. This significant event marks the policy divergence between the ECB and the U.S. Federal Reserve. Their differing rate trajectories could lead to the Euro weakening against the Dollar. How are Exchange Rates determined? In economics, Interest Rate Parity (IRP) states that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. The formula for IRP is: F0=S0 × ((1+ ic)/(1+ib)) , where: F0 = Forward Rate, S0=Spot Rate; ic = Interest rate in country c; ib = Interest rate in country b In the IRP formula, “b” stands for base currency where "c" is the currency to quote. As Euro-USD exchange rate is expressed as number of Euro per 1 Dollar, i(b) is US interest rate, where i(c) is ECB interest rate. Let’s examine a hypothetical situation where the ECB cuts interest rates three times but the Fed only implements one cut. All rate cuts are in the 25bp increments. Inputs: The ECB cut rates from 4.00% to 3.25% (new ic), and the Fed Funds rate will be lowered to 5.25% (new ib) from 5.50%. Before the cuts, the Euro/USD spot rate was 1.0800 (S0). Output: Plugging the data into the IRP formula, we get a forward rate of 1.0595 (F0), which is computed as 1.800 x (1.0325/1.0525). The IRP suggests that the Euro exchange rate would be lowered by 205 pips, or 1.9%, if the above assumptions hold true, all else being equals. This calculation is remarkedly simple, but nonetheless it describes what drives the value of any currency going up or down. Let’s explain this in plain English: An investor has the option of investing in either U.S. dollar or Euro. The market currently expects the ECB to lower rates more frequently than the Fed would, resulting in the interest rate spread between the dollar and the euro widening in the coming months. As a result, dollar assets would produce a higher return relative to the euro. In the currency market, arbitrageurs will buy up the dollar and dump the euro and attempt to lock in a return generated by the interest rate spread. This would result in the euro depreciating against the dollar. An equilibrium in Euro-USD exchange rate will be reached where holding assets by either currency generates the same return. This is the logic behind the IRP. It is called the Law of One Price. Many factors impact exchange rates. A framework using the IRP is a simplified but very insightful approach to project exchange rate movement over the medium- to long-term. Other factors, including but not limited to inflation, employment, consumer spending and corporate profit, can be viewed as variables influencing the central bank rate decisions. Asides from the mathematical approach, we could consider a country’s currency being reflective of its economic strength. In the early 2000s, the European Union (EU) grew at a faster pace than the US in terms of Gross Domestic Product (GDP). • Between 2000 and 2007, US GDP grew 41.2%, from $10.25 to $14.47 trillion. • Meanwhile, EU GDP nearly doubled, growing 98.8%, from $7.28 to $14.73 trillion. • The EU economy grew from about 2/3 of the US to matching to the same size. • Backed by a strong economy, the Euro gained in value, from 90 cents to over $1.50. However, the trend has been reversed in recent years. • In 2023, US GDP grew to $27.36 trillion, up 167% from 2000, where EU was up 152% to $18.35 trillion. The size of the EU economy is now down to 67% of the US economy. • Since peaking at $1.22 in December 2020, the Euro has been in a multi-year decline, currently trading at around $1.08. More recently, the EU has been hit hard by the global pandemic and geopolitical conflict. Its economy slows and unemployment rises, while inflation becomes sticky. Compared to the Fed, the ECB has more urgency to lower rates and provide relief to the economy of its member nations. When examining the long history of the ECB rate setting behavior, I find its preference in ultra-low rates. In fact, the ECB maintained a negative key rate (-0.5%) for years, before being forced to align with the Fed in a rate-hike journey to fight high inflation. Another observation: The Fed is an independent central bank and has the power to set monetary policy independently. Neither the President nor the Congress could exercise direct influence on the Fed interest rate decisions. The ECB, on the other hand, gets tremendous pressure from political leaders in the 20 governments within the Euro Zone. Rate cuts appeal to both political demand and public sentiment. Therefore, low rates will be a comfort zone for the ECB to fall back into. Unrealistic Market Expectations on the Fed This morning before US market open, the Bureau of Labor Statistics reported that the US consumer price index was unchanged for the month of May, lower than the 0.1% market estimate. On an annualized basis, the US CPI increased 3.3%, which also came in below expectations and represented a slowing from the prior 3.4% pace. Investors cheer for this good news. The three major US stock indexes jumped between 1%-2% in mid-morning. The 10-Year US Treasury Yield slid 140 bps to 4.264%. The Fed will release its June FOMC rate decision at 1:00pm, followed by a speech by the Fed Chair. The market currently expect no rate change in June, but the consensus is moving towards to 2 rate-cuts from 1 rate-cut by the end of the year. While the global markets would react strongly in the short term to any hint the Fed gives out on future rate trajectory today, the dust will settle once investors calm down. I still hold the opinion that the Fed is in no hurry to cut rates with inflation above 3%. The US economy is on solid ground. Cutting rates too soon would jeopardize the hard work of combating the out-of-control inflation in the past two years. Trading with CME Euro-FX Futures A short position in CME Euro-FX futures (6E) is a way to express this bearish view on Euro. The September (6EU4) contract is quoted at 1.08605 on June 12th. Each contract has a notional value of €125,000. CME requires an initial margin of $2,100. For a short futures position, a decline (increase) of 1 pip (0.0001%) in the exchange rate will result in $12.50 in gain (loss) in your account balance. Our earlier example suggests that the Euro-USD spot rate could be lowered to 1.0595, if the ECB pushes rate cuts forward. For illustration purpose, if 6EU4 price drops to 1.0595, the price change will be 265.5 pips (1.08605-1.0595=0.02655). And the gain in the short futures account would be $3,318.75 (= 265.5 x 12.50). Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME:6E1!Short
by JimHuangChicago
EUR Futures Look Bullish - Target 1.09095I'm bullish on EUR until 1.09095 is reached (high of the previous 2W candle). Currently intermediate timeframe (h8) is delivering bearish (closing below lows of up close candles). In this scenario, I look for entries when price trades into H8 fractal swing lows. If we see a bullish CISD on entry timeframe (M30) after sweeping an H8 low, I'll take a long. Alternatively, if h8 has a bullish cisd, I will look for entry timeframe triggers on pullbacks into bullish arrays.
CME:6EM2024Long
by Tradius_Trades
EURO (EURUSD, 6EM2024)... BULLISH!Bias is Bullish. Price traded through bearish PD Arrays, respecting bullish ones. Currently, price is in a +FVG, hence the bullish bias. Price is very close to the DOL, a swing high. Price may tap the +FVG more than once before heading higher. Expectations are for the DOL to be swept next week, as price grinds upward. Thank you for viewing! Leave any questions or comments in the comment section. I appreciate any feedback from my viewers! Like and/or subscribe if you want more accurate analysis. Thank you so much! May profits be upon you.
CME:6E1!Long
by RT_Money
COT reports + SMT. How to determine the long-term trend (BIAS).A pattern in the COT reporting curve to determine long-term trend or bias (BIAS). With a scope from several weeks to months. Of course, reports arrive with a delay, but on a long-term scale this is not a big problem. Many people use divergences, or SMT in the teachings of Smartmoney Michael Huddleston (ICT), when analyzing charts. Why not use COT and divergence reports together as a useful chart analysis tool. Everyone probably noticed that the positions of Commercial traders in the curve constructed from reports coincides with the price movement (there is some direct correlation, and a large one). After a long observation and playing with the scale, obvious discrepancies in correlations and emerging divergences (SMT) caught my eye. And very often at the peaks of movements, followed by a reversal. Data reports are of course released once a week. Therefore, tracking such SMTs can be used as an additional factor to determine bias in the analysis of higher time frames. And already having a bias for the next few weeks, or even a couple of months. You can look for signals in trades with confirmation on lower timeframes. I like these divergences, they are built on an indicator that is completely independent of price. unlike any RSI, Stochastics, etc. The curve is constructed solely based on trading volumes on the CME exchange, and does not depend in any way on the price, therefore it does not follow the price further to infinity. This is a direct correlation of two different data streams, and their divergence (divergence). I think I’ll make a separate short article about “data streams”, what I mean by this. And finally, of course, the tool is not the holy grail. But with a proper and adequate approach in skillful hands, it is a very good tool that can be kept in mind during a complex analysis of charts. At a minimum, if divergence occurs, you can be wary and reconsider your plans. I hope the information will be useful. Don't forget to like, subscribe, share with friends, leave comments. All you have to do is click a button, and I love seeing feedback. Thank you.
CME:6E1!Education
by Forex_Hoby