Trade Desk Client Note
Global Futures Review
Timing The Global Futures Trade
Higher Euro-zone rate of inflation reports sent EUR/USD higher on Tuesday, and held higher after absorbing very negative German ZEW reports. Global Futures markets ignored the moves in EUR valuations and continued their three-session sideways trek on low participation.
There are very few buyers of risk, and Credit Default Swap numbers continue to suggest that inter-bank lending will be expensive and not widely available. Trade Signals will be issued as sustainable price action hits the market. Trade Plan numbers caught the full EUR/USD and GBP/USD break-out moves.
Forex and Futures trade is not just about how each currency will move against the Usd or whether gold and silver are aligned; just as important is knowing when the market will have sustainable momentum.
Setting times to trade really does make a lot of sense with the near-term view that Forex and Futures valuations currently carry. The globalization of traded markets, where each 24 hour period has to absorb three regional commercial market moves from Asian, Europe and the US, means that timing the trade has probably never been so important.
There are three main Futures-moving times each day that regularly garner attention and offer an ability to move prices with momentum. They are the 2am ET German Dax futures market getting underway, the 6-7am ET London gold/oil fixings and LIBOR rates being set, and the 11am ET European market close.
Outside of those times, the return from lunch in Japan between 11pm ET and midnight, and the closing of the NYMEX markets at 2.30pm ET really are the only other times that prices move substantially and easily then hold.
At the end of the U.S. session the pattern is for Asian markets to try and initially reverse U.S. trade direction, although the lack of volume tends to soon allow Futures contracts to find and hold support areas. The European markets tend to move in the same direction as Asian trade, and then Chicago-based Futures movement will try to reverse things back in the direction of where the U.S. previously closed.
Futures markets re-set their books as the London Fixings are placed between 5-6am ET (10-11am GMT ) as telephone bids for the gold and oil fixings take place, something that sets the morning clearing prices for bullion and crude dealers which are then adjust once again at 10.30am ET (3.30pm GMT).
Added to the London Fixings each day is the British Bankers Association routine of setting the inter-bank LIBOR rates, something that sets the tone for lending rates between financial market participants.
The morning activity in London tends to force Chicago-based Futures markets into a re-alignment program at 06:00 ET that replicates the newly set fair values on oil, gold, and lending rates, and by default tends to then impact Usd based currency values.
It is rare for the U.S. not to push back each morning and reverse the pattern of Forex and Futures trade that came before; especially if a sizeable move has happened in overnight forex trade.
The European and then NYMEX closes at 11am ET and 2.30 pm ET are the U.S. based things to get out of the way, because then, maybe, the equity markets can reveal where they really want to go, and by default send the Usd in the opposite direction. Traders looking for moves outside of 2am, 6am, 11am, and maybe 2:30 ET, may just find themselves sitting and waiting, wondering why they just bought the high of the day that then reversed.
Futures traders really need to know what is going to trigger the technical set-ups, and therefore be prepared to ride momentum and time their trades. Capping expectancy and exposure when things are moving against the near-term trend, or have no trend, requires not only timing a trade on global momentum but to also bank early and often.
In the Global Futures trading arena there are different things to look for than in the equity and bond investment world. For example, 24-hour Futures trade absorbs fifteen global equity market trading sessions, all of which move for varying commercial regions.
Using Forex and Futures to hedge forward commitments, repatriate overseas profits, align reserve values, and garner swap interest is a mainstay of global commerce and the oldest form of traded market. Equity-only investing becomes myopic and creates some long-term roller coaster rides that few investors actually enjoy.
Global Futures trade can even out the ride and create a balanced viewpoint of what is actually unfolding each day.