CME: Micro Euro/USD Futures ( 
M6E1!), #microfutures
On July 27th, U.S. President Donald Trump and European Commission President Ursula von der Leyen announced the U.S. has reached a trade deal with the European Union.
• President Trump said that the deal imposes a 15% tariff on most European goods
• The EU will open its vast market to U.S. products, with 0% tariff
• The EU agreed to purchase $750 billion worth of U.S. energy
• The EU will also invest $600 billion into the U.S. above current levels
Financial market breathes a sigh of relief as the tariff was only half of the 30% rate previously feared. This critical deal marks the de-escalation of US-EU trade tensions. The two trading blocs together represent 30% of global trade and 43% of global GDP. In 2024, bilateral trade reached over €1.68 trillion, according to the EU.
The transatlantic partnership was at its lowest point since WWII. The US was prepared to exit NATO, leaving Europe the monumental challenge to rebuild its military and defense industry. The EU also faces problems in energy supply as well as rising social instability.
In my opinion, the Euro will benefit significantly with the stabilization of US-EU relations.
• Firstly, it allows the 27 EU nations to continue doing business with their biggest customer. The U.S. accounts for 20% of all EU exports in 2024, according to the EU.
• Secondly, due to its approach to energy policy, the EU now imports 55% of its energy needs. Natural gas imports fall by half as Europe reduces its reliance on Russian gas.
• Meanwhile, imports of liquefied natural gas (LNG) have doubled to fill the gap. The U.S. supplies half of LNG imports, according to Eurostat. The trade deal will secure low-cost LNG from the U.S., without tariff.
• Thirdly, while NATO members raise defense budget to 5% of GDP from 2-3%, the money will be spent more wisely by buying U.S. military equipment. Previously, for a worst-case scenario, I estimated a drag of 2% on GDP if EU were to rebuild its military and to directly engage in the Russia-Ukraine conflict. With the U.S. continuing its presence in NATO defense, this could be avoided.
• Fourthly, the Trump administration no longer pursues a strong Dollar. Instead, officials suggest that a weak dollar supports U.S. exports and helps raise the amount of tariff.
• Finally, the European Central Bank (ECB) kept interest rates unchanged in July, ending eight rate cuts over the past year. Meanwhile, the U.S. Federal Reserve eyes one or two rate cuts this year. The divergence in monetary policies would make the dollar weaken against the Euro, according to Interest Rate Parity (IRP).
The CFTC Commitments of Traders report shows that, as of July 22nd, CME Euro FX futures ($6E) have Open Interest of 843,447 contracts.
• Leveraged Funds have 102,310 in long, 73,901 in short, and 23,786 in spreads
• The long-short ratio of 1.4 shows that the “Smart Money” is bullish on the Euro
• The data reflects market sentiment before the trade deal
Micro Euro/FX Futures
A trader sharing a bullish view on Euro could explore the Micro Euro/FX futures ($M6E).
Each M6E contract has a notional value of 12,500 euro. On Monday afternoon, the September M6E contract (M6EU5) is quoted at 1.176, making it worth $14,700. Buying or selling one contract requires an initial margin of $340. The margining requirement reflects a built-in leverage of 43-to-1.
Let’s use a hypothetical trade to illustrate how to use a long futures position to take advantage of a potential rise of Euro.
Hypothetical Trade:
• Long 1 M6EU5 at 1.176, and set a stop loss at 1.15
• Trader pays $340 for initial margin
Scenario 1: Euro rises 5% to 1.235
• Long position gains: $737.5 (= (1.235-1.176) x 12500)
• The hypothetical return will be 217% (= 737.5 / 340)
Scenario 2: Euro falls 5% to 1.117
• The maximum loss: $325 (= (1.176-1.15) x 12500)
• While the position lost most of the money, the trader would not face a margin call due to the stoploss feature. Without it, the loss would have been $737.5
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
M6E1!), #microfuturesOn July 27th, U.S. President Donald Trump and European Commission President Ursula von der Leyen announced the U.S. has reached a trade deal with the European Union.
• President Trump said that the deal imposes a 15% tariff on most European goods
• The EU will open its vast market to U.S. products, with 0% tariff
• The EU agreed to purchase $750 billion worth of U.S. energy
• The EU will also invest $600 billion into the U.S. above current levels
Financial market breathes a sigh of relief as the tariff was only half of the 30% rate previously feared. This critical deal marks the de-escalation of US-EU trade tensions. The two trading blocs together represent 30% of global trade and 43% of global GDP. In 2024, bilateral trade reached over €1.68 trillion, according to the EU.
The transatlantic partnership was at its lowest point since WWII. The US was prepared to exit NATO, leaving Europe the monumental challenge to rebuild its military and defense industry. The EU also faces problems in energy supply as well as rising social instability.
In my opinion, the Euro will benefit significantly with the stabilization of US-EU relations.
• Firstly, it allows the 27 EU nations to continue doing business with their biggest customer. The U.S. accounts for 20% of all EU exports in 2024, according to the EU.
• Secondly, due to its approach to energy policy, the EU now imports 55% of its energy needs. Natural gas imports fall by half as Europe reduces its reliance on Russian gas.
• Meanwhile, imports of liquefied natural gas (LNG) have doubled to fill the gap. The U.S. supplies half of LNG imports, according to Eurostat. The trade deal will secure low-cost LNG from the U.S., without tariff.
• Thirdly, while NATO members raise defense budget to 5% of GDP from 2-3%, the money will be spent more wisely by buying U.S. military equipment. Previously, for a worst-case scenario, I estimated a drag of 2% on GDP if EU were to rebuild its military and to directly engage in the Russia-Ukraine conflict. With the U.S. continuing its presence in NATO defense, this could be avoided.
• Fourthly, the Trump administration no longer pursues a strong Dollar. Instead, officials suggest that a weak dollar supports U.S. exports and helps raise the amount of tariff.
• Finally, the European Central Bank (ECB) kept interest rates unchanged in July, ending eight rate cuts over the past year. Meanwhile, the U.S. Federal Reserve eyes one or two rate cuts this year. The divergence in monetary policies would make the dollar weaken against the Euro, according to Interest Rate Parity (IRP).
The CFTC Commitments of Traders report shows that, as of July 22nd, CME Euro FX futures ($6E) have Open Interest of 843,447 contracts.
• Leveraged Funds have 102,310 in long, 73,901 in short, and 23,786 in spreads
• The long-short ratio of 1.4 shows that the “Smart Money” is bullish on the Euro
• The data reflects market sentiment before the trade deal
Micro Euro/FX Futures
A trader sharing a bullish view on Euro could explore the Micro Euro/FX futures ($M6E).
Each M6E contract has a notional value of 12,500 euro. On Monday afternoon, the September M6E contract (M6EU5) is quoted at 1.176, making it worth $14,700. Buying or selling one contract requires an initial margin of $340. The margining requirement reflects a built-in leverage of 43-to-1.
Let’s use a hypothetical trade to illustrate how to use a long futures position to take advantage of a potential rise of Euro.
Hypothetical Trade:
• Long 1 M6EU5 at 1.176, and set a stop loss at 1.15
• Trader pays $340 for initial margin
Scenario 1: Euro rises 5% to 1.235
• Long position gains: $737.5 (= (1.235-1.176) x 12500)
• The hypothetical return will be 217% (= 737.5 / 340)
Scenario 2: Euro falls 5% to 1.117
• The maximum loss: $325 (= (1.176-1.15) x 12500)
• While the position lost most of the money, the trader would not face a margin call due to the stoploss feature. Without it, the loss would have been $737.5
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Jim W. Huang, CFA
jimwenhuang@gmail.com
cmegroup.com/markets/microsuite.html
jimwenhuang@gmail.com
cmegroup.com/markets/microsuite.html
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Jim W. Huang, CFA
jimwenhuang@gmail.com
cmegroup.com/markets/microsuite.html
jimwenhuang@gmail.com
cmegroup.com/markets/microsuite.html
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.