The Six Best Hours to Trade the Euro

The euro (EUR) ranks second behind the U.S. dollar (USD) in terms of global liquidity, trailed by the Japanese yen (JPY) and British pound (GBP). Forex traders speculate on EUR strength and weakness through currency pairs that establish comparative value in real-time. Although brokers offer dozens of related crosses, most clients focus their attention on the six most popular pairs:

U.S. dollar (USD) – EUR/USD
Swiss franc (CHF) – EUR/CHF
Japanese yen (JPY) – EUR//JPY
British pound (GBP) – EUR/GBP
Australian dollar (AUD) – EUR/AUD
Canadian dollar (CAD) – EUR/CAD
EUR trades continuously from Sunday evening to Friday afternoon in the United States, offering significant opportunities for profit. However, volume and volatility can fluctuate greatly in each 24-hour cycle, with bid/ask spreads in the less popular pairs widening during quiet periods and narrowing during active periods. While the ability to open and close positions at any time marks a key benefit of forex, the majority of trading strategies unfold during active periods.
Many forex traders focus their full attention on the EUR/USD cross, the most popular and liquid currency market in the world. The cross maintains a tight spread throughout the 24-hour cycle, while multiple intraday catalysts ensure that price actions will set up tradable trends in both directions and along all time frames. Long- and short-term swings also work extremely well with classic range-bound strategies, including swing trading and trading channels.

Euro Price Catalysts
The best time to trade the euro coincides with the release of economic data, as well as the open hours at equity, options and futures exchanges. Planning ahead for these data releases requires two-sided research because local (eurozone) catalysts can move popular pairs with the same intensity as catalysts in each of the cross venues. Moreover, U.S. economic data can have the greatest impact on all currencies, due to the overriding importance of the EUR/USD pair.

In addition, EUR crosses are vulnerable to economic and political macro events that trigger highly correlated price actions across equities, currencies and bond markets around the world. China’s devaluation of the yuan in August 2015 offers a perfect illustration. Even natural disasters have the power to generate this type of coordinated response, as evidenced by the 2011 Japanese tsunami.

Economic Releases
Eurozone monthly economic data is generally released at 2 a.m. Eastern Time (ET) in the United States. The time segment from 30 to 60 minutes prior to these releases and one to three hours afterwards highlights an enormously popular period to trade EUR pairs because the news will impact at least three of the five most popular crosses. It also overlaps the run-up into the U.S. trading day, drawing in significant volume from both sides of the Atlantic.

U.S. economic releases tend to be released between 8:30 a.m. and 10 a.m. ET and generate extraordinary EUR trading volume as well, with high odds for strongly trending price movement in the most popular pairs. Japanese data releases get less attention because they tend to come out at 4:30 p.m. and 10 p.m. ET, when the eurozone is in the middle of their sleep cycle. Even so, trading volume with the EUR/JPY and EUR/USD pairs can spike sharply around these time zones.

Euro and Equity Exchange Hours
The schedules for many EUR traders roughly follow exchange hours, centering their activity when the Frankfurt and New York equity markets and Chicago futures and options markets are open for business. This localization generates an increase in trading volume around midnight on the U.S. East Coast, continuing through the night and into the American lunch hour, when forex trading activity can drop sharply.

However, central bank agendas shift this activity cycle, with forex traders around the world staying at their desks when the Federal Reserve (FOMC) is scheduled to release a 2 p.m. ET interest rate decision or the minutes of the prior meeting. The Bank of England (BOE) issues its rate decisions at 7 a.m. ET, while the European Central Bank (ECB) follows at 7:45 a.m. ET, with both releases taking place in the center of high volume EUR activity.

The Bottom Line
Six popular currency pairs offer euro traders a wide variety of short- and long-term opportunities. The best times to trade these instruments coincide with key economic releases at 1:30 a.m., 2 a.m., 8:30 a.m. and 10 a.m. U.S. Eastern Time, as well as between midnight and noon, when European and American exchanges keep all cross markets active and liquid.

 

4 ETFs to Trade the Euro

4 ETFs To Trade the Euro (FXE, ULE)
By Anthony Jerdine| March 18, 2016

In December 2015, the U.S. dollar reached its highest close since 2003, and the euro its lowest close since 2003. These could be significant highs and lows, and many investors may be entering currency trading hoping to avoid the carnage in stocks, junk bonds and commodities from over the previous few months. Making money in currencies is not an investment layup in any sense, but currency exchange-traded funds (ETF) provide a convenient way to become involved in currency trading without the requirement of a separate forex account. Traders interested in the euro’s next move, for example, have a number of ETFs that allow them to test their hunches.

CurrencyShares Euro ETF
For currency ETFs, managers attempt to hit their benchmark objectives by utilizing currency futures, forward contracts and various derivative products. The granddaddy of long euro currency ETFs is the CurrencyShares Euro ETF (NYSEARCA: FXE). It is sponsored by Guggenheim Specialized Products, LLC and first appeared in December 2005. This unlevered ETF should be the first choice for investors who want to go long the euro. Net assets total $275 million, and liquidity is excellent with an average of 393,000 shares traded daily. Expenses are also low at 0.4%, and bid/ask spreads are tight. Similar to other currency ETFs, FXE trades only during regular stock market hours and is not actively managed. Its objective is to track as closely as possible the performance of the EUR/USD cross rate, and it does a good job in accomplishing this task. The year-to-date (YTD) return of FXE was 3.5% at the close on Feb. 12, 2016. In comparison, the TradeStation forex platform shows the EUR/USD returned 3.7%. The tracking is not perfect but it is probably close enough for most traders.

 

ProShares Ultra Euro ETF
ProShares offers a long euro ETF, the ProShares Ultra Euro ETF (NYSEARCA: ULE), designed to provide a leveraged return equal to twice the daily return of the dollar versus the euro. It does not offer an unleveraged option. The problem with leveraged products is the effects of compounding over more than a one-day period often produce slippage, and tracking the benchmark becomes more difficult. ULE’s YTD return of 6.8%, while double the return of the EUR/USD currency pair, equates to 7.4%. Another issue is the high expense ratio of almost 1% compared to FXE’s 0.4%. Total assets are $12 million, and average volume is 3,600 shares per day. Liquidity and bid-ask spreads are poor in comparison to FXE.
4 ETFs To Trade the Euro (FXE, ULE) In December 2015, the U.S. dollar reached its highest close since 2003, and the euro its lowest close since 2003. These could be significant highs and lows, and many investors may be entering currency trading hoping to avoid the carnage in stocks, junk bonds and commodities from over the previous few months. Making money in currencies is not an investment layup in any sense, but currency exchange-traded funds (ETF) provide a convenient way to become involved in currency trading without the requirement of a separate forex account. Traders interested in the euro’s next move, for example, have a number of ETFs that allow them to test their hunches.

CurrencyShares Euro ETF
For currency ETFs, managers attempt to hit their benchmark objectives by utilizing currency futures, forward contracts and various derivative products. The granddaddy of long euro currency ETFs is the CurrencyShares Euro ETF (NYSEARCA: FXE). It is sponsored by Guggenheim Specialized Products, LLC and first appeared in December 2005. This unlevered ETF should be the first choice for investors who want to go long the euro. Net assets total $275 million, and liquidity is excellent with an average of 393,000 shares traded daily. Expenses are also low at 0.4%, and bid/ask spreads are tight. Similar to other currency ETFs, FXE trades only during regular stock market hours and is not actively managed. Its objective is to track as closely as possible the performance of the EUR/USD cross rate, and it does a good job in accomplishing this task. The year-to-date (YTD) return of FXE was 3.5% at the close on Feb. 12, 2016. In comparison, the TradeStation forex platform shows the EUR/USD returned 3.7%. The tracking is not perfect but it is probably close enough for most traders.

ProShares Ultra Euro ETF
ProShares offers a long euro ETF, the ProShares Ultra Euro ETF (NYSEARCA: ULE), designed to provide a leveraged return equal to twice the daily return of the dollar versus the euro. It does not offer an unleveraged option. The problem with leveraged products is the effects of compounding over more than a one-day period often produce slippage, and tracking the benchmark becomes more difficult. ULE’s YTD return of 6.8%, while double the return of the EUR/USD currency pair, equates to 7.4%. Another issue is the high expense ratio of almost 1% compared to FXE’s 0.4%. Total assets are $12 million, and average volume is 3,600 shares per day. Liquidity and bid-ask spreads are poor in comparison to FXE.

ProShares Short Euro ETF
To go short the euro, investors can consider the ProShares Short Euro ETF (NYSEARCA: EUFX). This ETF is unlevered and aims for daily investment results that correspond to opposite the performance of the EUR/USD cross. EUFX began trading in 2012, and it has not been a roaring success. Expenses are high at nearly 1%, and assets total $17 million. Benchmark tracking is good, however, showing a return of -3.5% at the close on Feb. 12, 2016. The reason for the lack of activity in EUFX is traders have flocked to the leveraged version of this ETF. A consideration for investors who resist leveraged ETFs is to short-sell FXE if the shares can be borrowed from the broker. This is an option for more sophisticated people familiar with the potential downside of short positions.

ProShares UltraShort Euro ETF
The ProShares UltraShort Euro ETF (NYSEARCA: EUO) is by far the most frequently used ETF to short the euro. It is leveraged and attempts to double the opposite return of the EUR/USD cross rate. The expense ratio of almost 1% is high, but that comes with the leveraged ETF territory. Total assets clock in at $420 million with average daily volume of over 400,000 shares. In terms of hitting its benchmark, it has performed admirably thus far in 2016. The opposite return is -7.1% compared to the 7.4% of the EUR/USD cross rate. In fact, it has done a better job than the ProShares Ultra Euro ETF, slipping only 300 basis points from the benchmark versus a drop of 600 basis points for ULE. This difference may be attributable only to random noise in the short term, but ProShares measured the correlation to the benchmark as -0.99 during the fourth quarter of 2015, which is a very high inverse correlation.
There are several ETF choices for investors who have the inclination to trade the euro and want to avoid the complications of a separate forex account.