Trade Of The Year?

August 29, 2016 | Taylor Letterman

Short Eurodollar Futures – June 2017 Eurodollar Chart – Possible Double Top.

With the job situation much improved in America and inflation ticking up again, I firmly believe the Fed will move sooner rather than later in the quest to normalize rates. Please remember, you cannot have inflation without wage growth and wages are averaging +3% in 2016.

I am quite bearish credit markets across the whole of the yield curve. Eurodollar futures are the shorter-end of the yield curve. Only three years ago this product traded 9652 as the world anticipated a hike in the Fed Funds rate.

Being short this contract remains, in my opinion, the trade of the year. And the old saying goes, never underestimate the power of the bear. The bear can undo years of hard work in a matter of months. The bear can undo months of hard work in a matter of weeks. The bear can undo weeks of hard work in a matter of days.

The chart below is not the Eurodollar currency. This is the June 2017 Eurodollar futures contract. It is an interest-rate related product. Eurodollar futures are a LIBOR based derivative, reflecting the London Interbank Offered Rate for a 3-month $1,000,000 offshore deposit. The London Interbank Offered Rate (LIBOR) is a benchmark for short-term interest rates at which banks can borrow funds in the London interbank market.

The margin on one June 2017 Eurodollar future is $401.50. This product trades in half-ticks at $12.50 a half-tick, $25 for a full tick. In other words, a trade from 9893.50 down to 9883.50 on one contract is $250.

The chart posted below is self-explanatory. Levels and objectives have been identified.

EURODOLLAR Futures Double Top  2017