The Common Currency of the European Union rallied smartly on the back of a do-nothing Federal Reserve meeting, rocketing up nearly a cent to better than 1.56 dollars to the Euro. The reaction to the Fed announcement garnered a particularly high level of trading, with more than 200,000 contracts changing hands. Does the rally on high volume carry more significance? What about when it coincides with an announcement by the FOMC?
Q: What happens when there is high volume levels in the Euro Currency futures (CME.EC) on the same day as an FOMC policy statement?
A: Of the dozen past instances, 10 have rallied over the coming 13 trading days. Average gains, of 1.59%, have tripled the magnitude of the typical loss, 0.51%, the overall trade average is 1.24%, close to the trade's standard deviation of 1.46%, while the t-stat is just under 3, falling in the 99% confidence interval.
Jason Thompson is a Chicago-based speculator focusing on electronically traded derivatives and their underlying instruments.
