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Home / Futures Blog / Today’s Post FOMC Trade Opportunity in Euro FX Futures

Today’s Post FOMC Trade Opportunity in Euro FX Futures

October 28, 2015 by Scott Hoffman

Trends and market movements in the foreign exchange / currency futures markets are driven by interest rate differentials and trends in interest rates, As such; currency futures are often a great trading vehicle after central bank policy setting meetings.

Today’s FOMC meeting was a good opportunity for potential changes is US interest rate policy, thus an event that could cause big moves in the currency futures.  (This is a time I prefer watching the currencies rather than stock indices, which have more factors in play.)

To highlight today’s opportunity, a number of currency futures had breakout setups for today.  Before the meeting many traders are don’t want to commit to a market direction, not knowing what the upshot of the meeting will be. After the meeting markets often make a large move in one direction as traders adjust to updated fundamentals.

The Euro had a breakout setup for today. In the September FOMC meeting, the fed cited global markets and the global economy as a reason for caution on raising rates. This gave the perception of a more dovish Fed and markets reacted accordingly- many analysts pushed their forecast for a first rate hike out to months into 2016.

Many were surprised when the Fed cited international factors so explicitly in its policy making criteria as its mandates are employment and inflation. As a result of the confusion, a number of Fed officials spent the next weeks walking back the perceived dovishness from the September meeting.

Today’s meeting was an opportunity to get better clarity as to Fed policy; something more than the cacophony of comments we got out of Fed officials. Because of this, there was the potential for big market moves (in either direction) if Fed policy was clarified.

The Euro currency futures were ground zero of interest rate policy changes and concurrent exchange rate movements. While there was confusion as to when (or if) the Fed would raise interest rates, the ECB hasn’t explicitly stated when (or whether) it plans to expand its quantitative easing, a proxy for lowering interest rates.

ECZ daily Oct 28

The Euro currency futures (the daily chart is above) had a breakout setup for today- Tuesday was an NR4 day and a doji bar. We would look for a potential breakout trade after the 1 PM end of the FOMC meeting; either a rally above Tuesday’s high of 1.1086 or a break below 1.1037 (Tuesday low) and 1.1004 (Friday low).

This morning we saw a small move above Tuesday’s high. There wasn’t rally much to read into this and it was a move for us to ignore, as it told us nothing about what the market was likely to do after 1 PM.

The communique after the FOMC meeting did provide a catalyst for a market move as the Fed discussed conditions for a potential rate hike at the December meeting. This was the Fed’s first mention of a possible rate hike (even if it was data dependent) and swung the pendulum from a perceived dovish Fed in September to a relatively hawkish Fed after this meeting.

ECZ intraday Oct 28

This gave the green light to a rally in the USD and the Euro sold off hard as a result. The two downside reference prices were taken out minutes after 1 PM, triggering our breakout short sales. The selloff continued over the next hour, making a session low of 1.0905 a little before 2 PM.

Swing Trader's Insight Essential Reference Guide Cover

Essential Guide for Futures Swing Trading

In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Filed Under: Swing Trader's Insight

About Scott Hoffman

Scott graduated from the University of Chicago in 1986 with a degree in Economics. After graduation, Scott worked on the floor of the Chicago Mercantile Exchange then moved upstairs, serving as the personal broker to a former chairman of the Chicago Board of Trade. There, he worked as a broker and margin manager, starting up the firm’s full service brokerage division.

Today, Scott serves as an educator and mentor for new traders, and as a trading partner and ally for experienced traders. The breadth and depth of Scott’s knowledge make him the “go to guy” for both retail and institutional traders.

Scott also publishes two futures advisories, Swing Trader’s Insight and Trade or Fade. He also writes the futures trading blog at www.futuresinsightblog.com. Scott has written articles for a number of futures publications and has done numerous futures trading seminars, including seminars for both the CBOT and CME.

Scott offers his customers the knowledge he has gained from his more than 25 years of experience in the futures business. Scott is accepting new clients at this time.

Scott lives in suburban Chicago with his wife and three children. In his free time he enjoys coaching his children’s sports and various other athletic activities.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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