Euro FX stocks are a part of this money category, tracking the underlying stock that’s that the euro, or even EURUSD. Founded in U.S. dollars, day traders in the futures marketplaces can trade the euro stocks the inherent spot EURUSD amounts at a standardized and regulated way. Money futures are cash settled or might be depended .
When you trade the euro fx currency stocks contract, you’re purchasing or attempting to sell the euro money futures contract that’s actually a binding compliance medially your counter parties. The worldwide forex marketplace is among the most significant marketplaces on the whole world, accounting for more than 4 trillion in daily turnover, in accordance with statistics from the Bank for International Settlements. Money stocks are mainly offered in the CME market and goes back into the break down of this 1972 Bretton Woods compliance that led in free floating exchange prices. Other exchanges offering the euro fx stocks incorporate the Eurex.
Trading the Euro FX futures has a unique identifying benefits, though it’s a whole lot simpler to trade the location marketplaces directly. Still, based upon where you are and regulatory supervision, trading the money futures supplies a far better alternative to investing in the money marketplaces compared to compared to the spot FX marketplaces. The euro is actually a fairly new comer to the forex marketplaces, having been available after all 1999. But despite being overdue to the money marketplaces, the one money as it’s often called has come to be among the most frequently traded currencies and will be claimed to have surpassed the U.S. buck concerning flow.
Before you get started investing in the Euro FX futures contract, below are seven things you got to know.
Number 1. Euro fx futures volumes
The euro fx futures is purchased as standardized contracts by the CME or the Eurex markets. Of those two, the euro fx futures against the CME group will be the most widely used. Statistics proves that the Euro fx stocks bring a regular level of 300,000 contracts rendering it probably one of the very frequently common money futures available for trading.
Standard Euro fx futures volume (CME Group)
Trading the euro fx futures is conducted electronically via the Globex electronic platform. There are many different versions of the euro fx contracts such as the standard contract, e-mini versions as well as options on the euro fx futures.
The euro fx futures marketplaces are made up of various marketplace participants who seek to gain exposure to the contracts for a number of reasons. Hedgers seek to the euro fx futures contracts to hedge the risks of the volatility in the euro currency. Market participants also include large institutions, banks, import and export companies who seek to either hedge their risks or look at the futures marketplaces to obtain better financing terms. Speculators also form a major part of the marketplace participants in the currency futures marketplaces, seeking to make short term benefits on the volatility in amounts.
#2. Euro FX Futures contract specifications
The euro fx futures are standardized contracts. A single futures contract on Euro FX is equivalent to 125,000 euro for the standard contract and is settled either for cash or for physical delivery. Besides the standard euro fx contracts, there is also a mini-sized euro fx contracts available from the CME exchange. The table underneath gives a summary of the two types of euro fx contracts available for trading.
|Standard Euro FX||E-Mini Euro FX|
|Minimum Tick size||$0.00005||$0.0010|
|Contract Months||12 months|
|Trading hours||Sun – Fri: 0600 – 1700 CT
60 minute break at 1700
|Sun: 1700 – 1600 CT
Mon – Fri: 1700 – 1600 CT
Fri: 1600, marketplace locked
The main difference medially the standard and the mini-sized euro fx futures contracts is the pricing. The former has a 5 decimal pricing, whereas the latter has a 4 decimal pricing. The mini-sized contracts are half the value of the standard euro fx futures contracts.
E-Mini Euro FX futures amount (CME Group)
Trading volume onto the mini-sized euro fx contracts are rather lower in contrast with this normal euro fx contracts. While this shouldn’t be an issue for the day trader, low liquidity especially during off marketplace hours can see the lack of liquidity that can impact some traders. There is also the e-micro futures contracts for the euro currency, which is priced in euros, but the futures contract has one of the lowest average daily volume compared to all the three types of euro fx contracts.
#3. Difference medially Euro Fx futures and spot fx pricing
The euro fx futures amounts tracks the underlying spot EURUSD amount. The spot fx marketplace pricing is the amount at which the interbank marketplaces offer to purchase and sell. The futures contracts are marked to marketplace on a daily basis; however the main difference is that the euro fx contracts (and currency futures contracts in general) do not carry overnight swaps or rollover fees which is common in the spot fx marketplaces.
The interest rate differential is the difference medially the main interest rates in the base currency (EUR) and the quote currency (USD). This interest rate differential is credited or debited from a trader’s equity in the spot fx marketplaces. For example, if the European Central Bank has a zero interest rate, while the U.S. Federal Reserve has an interest rate of 0.75%, then when you sell the EURUSD and hold the short position overnight, a negative swap or fee is applied to your equity. On the other hand, when you have a long position in EURUSD, a positive swap is applied to the positions that are kept open overnight.
However, in the currency futures, closer to the contract’s expiry date, the pricing is automatically adjusted to account for this interest rate differential or IRD. While traders is mistaken to assume that trading the futures currency marketplaces are cheaper especially in terms of the overnight swaps, the fact is that the IRD is priced into the futures pricing.
#4. Euro fx futures correlation to the U.S. dollar index
The U.S. Dollar index is a trade weighted index which is made up of a basket of currencies. The currencies in the dollar index and the weightage are euro (57.6%), yen (13.6%), British pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), Swiss franc (3.6%).
U.S. Dollar Index – Currency Weightage
The euro, function as money together with over 50 percent of weight-age infers that the movements at the U.S. dollar indicator (which you can find stocks derivates as well) is significantly determined by the euro fx stocks since it’s priced in U.S. dollars. Even though dollar index and the euro fx stocks don’t move in exact percent or pip stipulations, the effect of these amounts is viewed.
The graph underneath shows the U.S. dollar indicator at top with all the euro fx futures graph at the base that shows that the strong inverse correlation medially both of these shares.
U.S. dollar index (top) and Euro fx futures (bottom)
The inverse correlation medially these two is a great way for day traders to look for validation from another stock (currency) which is of a big profit especially when looking at the technical aspects of trading the euro fx contracts.
#5. Macro-economic factors influencing the euro
The euro currency is shared by 19 nations from the 28 nation European Union. As such the regional macroeconomics play a crucial role on the day to day basis which affects the volatility of the euro, also known as the single currency. However, you do not need to track the economic performance of all the 19 nations. From these, Germany, France and Italy are the three biggest economies in the eurozone from which Germany’s economic performance has a direct influence on the single currency, which is also considered to the power horse of the 19-nation currency bloc.
The eurozone is no newcomer to the regional crises that tends to engulf the region into financial chaos at regular intervals. Readers would be aware of the various crises in the EU such as the Cyprus bank bailout, Greece’s sovereign debt crisis as well as the recent surge in anti-EU that has given rise to populist parties who vehemently oppose the idea of the single currency.
The euro is also a firm favorite as a currency that is most likely to fail in what many consider it to be a large scale monetary and economic policy. While the winter months are usually quiet, the eurozone has an affinity to crises during the summer months, something which traders need to bear in mind.
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Besides the above factors, following the European Central Bank’s policies is also important. Currently, the central bank is in an easing mode for monetary policy, running its quantitative easing program in an effort to pull the economy out of years of slow growth and weak inflation. The European Central Bank is the sole monetary authority with the 19-regional national central banks acting merely as a branch of the ECB. Therefore, monetary policies from the ECB often affect the economies of all the 19-nations that share the single currency.
#6. Following the EURUSD seasonality
In the commodity marketplaces, seasonality is often defined by the cycles of production and consumption. For example, a crop that typically takes 3 – 6 months of sowing followed by harvesting will usually see amounts fall on expected boost in supply and vice versa. The currency marketplaces also tend to follow a seasonal pattern and the euro fx futures also tend to do so.
The euro currency tends to exhibit strong momentum during the winter months, with amounts typically rising from December into January. A local low is typically formed during the Feb-March period following which amounts again tend to strongly rally into the start of summer. Around June-July, the euro then starts to enter a bearish cycle with amounts showing a bottom by October-November.
Euro Fx Futures Seasonal Trends
The above chart shows a10 and also 5-year composite summary of the seasonality from the euro fx futures. This seasonality could be utilized by day traders to see the trends depending on the month they are trading and position themselves so.
Number 7. Speculative placement – Following the wise money
One of the largest benefits of investing in the money futures within their OTC counter parts is that the simple fact because futures are standardized and regulated, it helps the typical retail trader to generate utilization of certain info. The Commitment of Traders report, that will be commonly utilised from the commodity futures marketplaces, additionally holds power over the money markets. Adhering to week CoT monitoring and report the institutional trader’s placement may be of fantastic profit.
One of the easiest strategies to take improvement with this info is to search for bottoms and peaks at the institutional placement at the CoT report. Once in a while, the wise money has been over crowded to a single side of this marketplace; Net long or net short. Using a comparative contrast (an average of a 5-year period) a busy net long or net short position available in the marketplace will frequently lead to amounts ripping into the alternative direction.
Euro Fx futures and institutional investors positioning (Source freecotdata.com)
The above chart shows the euro fx futures continuous contract amounts on the top and the Institutional Investors positions at the bottom. You can see how amounts tend to move inversely every time the smart money heads to record net long or net short positions. This information, combined with other factors such as technical and fundamental analysis can yield good short term benefits.
In conclusion, within the currency futures category, the euro fx futures rank right on top in terms of volume reflecting on the level of activity in the euro fx futures contracts. With low day trading margin requirements, traders can easily trade the standard or the e-mini euro fx futures contract by simply paying a commission and no additional fees. You can take improvement by trading the euro fx currency futures either to hedge the risks of your portfolio or to take improvement of the volatility in the euro fx futures.