Up we go All ideas are strictly my interpretation of price action. I am not a professional trader nor is this professional advice.Longby THE_APIS_TRADER1
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 Shortby JimHuangChicago3
Directional Bias still in playAs you can see price returned to fill my position and then ran to my TP This was a live trade taken today, I highlighted this move yesterday with potential further downside to clear Mondays lows. Manage risk and watch news. . . . . not sure why this doesn't show my executionShortby Sharingan-Trading1
Target Hit! Now a lower objective?After yesterdays trade idea played out as expected we saw price hit a Higher time frame objective and quickly turn around, Could this be a good time to aim for yesterdays lows? We shall seeShortby Sharingan-Trading1
Flip FlopAll ideas are strictly my interpretation of price action. I am not a professional trader nor is this professional advice. Longby THE_APIS_TRADERUpdated 1
Middle of the range with bullish potentialEur/Usd is hovering in the middle of its range at the moment imo skewing slightly bullish in preparation for todays Manufacturing PMI numbers. be careful trading ahead of big news and manage risk.Longby Sharingan-Trading1
my bias for the upcoming weekFor me the market is bullish but it gonna retrace first then make the real move by Sive-Garly0
EUR (EURUSD) Weekly Forex Forecast... BULLISH! Price may have a relatively easy run to the high at 1.09095.Long07:01by RT_MoneyUpdated 110
6E: Possible level to risk off setting upAlso potential in middle of a trading range. Looking to get in late on building momentum if bulls take control.Longby AgedvagabondUpdated 1
6E: HL MTRPoosible HL MTR, Good moomentum Looking to ride for as long as valid. Possible channel top or range highsLongby AgedvagabondUpdated 0
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.Longby Tradius_TradesUpdated 1
My Trading Model In A NutshellCant Make Trading Any Simpler Than This. The Rest Is Psychology Happy to explain it to anyone if they are interested.by Sharingan-Trading1
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.Longby RT_Money0
Long 6E setup Daily chart is bullish and showing room to run. Looking to buy a pullback. Stop is comfortable and protected. Longby GrayTrader01Updated 1
EUR ShortEUR Short #ATA price is in a bullish flag pattern. The ascending channel was broken,Shortby VanThong900
EUR/USDEur broke and closed above previous internal high signalling potential continuation to the upside. Enter trade on return to gap and shave off a piece above the new high created. roll stops if you feel conservative for a free look at potential higher prices.Longby Sharingan-Trading2
EUR (USD) (6E1!, EURUSD, Futures)... BEARISH Outlook!Consolidating around the EQ of the trading range. Price could very well reach premium arrays before ending the retracement phase. This makes sense when considering FOMC tomorrow.Shortby RT_MoneyUpdated 3
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. Educationby Forex_HobyUpdated 2
Eur - Futures - 29/4/2024 - Swing tradingGood morning everyone, today on the euro pair, After 26 weeks we had the highest number of Negative net positions for the EUR futures. And we had a Buy signal from the commercial side. Alongside that we can see the DXY is slowing down after starting off 2024 with very strong movement to the upside. Longby insanemalin1
EUR (6E1!, EURUSD) Taking a BEARISH TurnLooking for an Internal to External move this week. From the Weekly -FVG to the low at 1.06285. The early part of the week may see price head up to sweep LQ before turning over and dropping. * Should the 4H show a bearish break of structure with a strong close, it may provide an early signal that the retracement has ended and sells should be sought. LIKE, COMMENT or SUBSCRIBE if you like and want to see more analysis. Thank you for viewing!by RT_MoneyUpdated 0
6E updateEuro Futures! 6E is at Support zone. As soon as it break, Target is by arrow! Note - Long Time projected.by sunmikee1
EURO (6E1!, EURUSD) ... BEARISH!Bearish. Price has moved up into the -FVG after a BOS. Expecting a move down from here, as Internal moves to External LQ. SSL is the target, at the lows to the left. I enjoy any feedback or questions in the comment section. All opinions are welcome! LIKE or BOOST this post, if you would. I would be appreciate it. SUBSCRIBE if you want to catch all of my future postings!Shortby RT_Money1
EURO FUTURES - STIL STRONG SELLINGHello, On this opportunity I am sharing my Supply & Demand Analysis about Euro Futures Contract @ Monthly Timeframe for Position/Institutional trading. Following Supply and Demand probability rules (high probability and liquidity on extremes) I expect price reach Monthly Demand Zone (0.88430 - 0.86050) then strong buy towards up to Monthly Supply Zone (1.60245 - 1.55235). It's advised to buy EUR/USD, GB/PUSD, XAU/USD, BTC/USD when and only when price reach Monthly Demand zone until then there's no high probability buy on these pairs. Hope you enjoy it.Shortby eldes0