FOREX and ECONOMETRY. Theory, practice, forecasts and implications - page 10

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Renat Akhtyamov:

Anton, what do you say about this, what happens to the course if:


What makes you think there was any significant volume in the euro yesterday at all?
 
Anton Govorukhin:
All major market participants in this market (among them such giants as Deutsche Bank, USD, GP Morgan Chase, etc.) perform quotations and act as a kind of "market engine" - Market Makers, making transactions either with other banks or clients - investment funds, companies, individuals. All other participants of the Forex market may be called Market Makers (users), because they request quotes from Market Makers and make transactions using them (or reject them waiting for more favourable quotes). The futures market is the same volume. It is where the main trades and hedging take place... And it is against the hedgers that the market goes...
The futures are bought with the same currency, so they are instantly included in the spot price, so they can't influence the spot market in any way. If the futures market influenced the spot market, we would see different futures prices on different futures exchanges, in reality it does not happen and the futures price is always equivalent to the spot. The analogy is that the tail cannot wag the dog.
 
Maxim Dmitrievsky:
the futures are bought for the same currency, so they are instantly included in the spot price, so they cannot influence the spot market in any way. If the futures market had an impact on the spot we would see different futures prices on different exchanges, but it doesn't happen and the futures price is always equivalent to the spot
so it is included in the spot price instantly, so it can't affect the spot market in any way. How could you possibly think that up?) If they are counted there, how can they not affect it?
 
Anton Govorukhin:
so it is instantly factored into the spot price, so it cannot affect the spot market in any way. How did you even come up with that:)? If they are counted there, how can they not affect it?
Maybe I don't understand the question...
 
Anton Govorukhin:
Maybe I didn't understand the question...

If you buy euro futures, you have to have the currency you buy them with. All major currencies are linked to the dollar, that is, if you buy a euro futures for rubles, you kind of automatically sell the dollar and buy rubles, respectively, the dollar quotation decreases (a rough example), and you buy a eurodollar futures and it rises, but not because you bought it, but because before you performed a currency conversion operation and sold the dollar. And by buying a futures contract, you simply arbitrage the situation. If you don't do it, someone will do it for you.

You simply will not feel this misbalance, and as soon as you get ready to buy Eurodollar futures, they will automatically become unprofitable for you, because you already had in your hands rubles which earlier decreased the dollar value, accordingly Eurodollar futures already discounted this change. That is essentially an arbitrage that you will never have time to do... or you have to sell the quid instantly, buy the rubles, and then buy the Eurodollar futures before it has time to discount your sale of the dollar yet.

 
Anton Govorukhin:
What makes you think there was any significant volume in the euro yesterday?

I'm looking at SME....

Still a question - there was some serious buying in the euro on Friday.

How will the EURUSD price react - will it rise or fall?

 
Maxim Dmitrievsky:
If you buy euro futures, you have to have the currency you buy them with. All major currencies are pegged to the dollar, that is, if you buy a euro futures for rubles, you kind of automatically sell the dollar first and buy rubles, respectively, the dollar quote goes down (a rough example), and you buy a eurodollar futures and it goes up but not because you bought it, but because before that you made a currency conversion operation and sold the dollar... like that
Yes you're right... that's exactly what happens if you leave out a few other things... But you're right, if you buy euro futures you have to have a currency to buy them with. All major currencies are pegged to the dollar... The initial volume goes on the futures market
 
Anton Govorukhin:
Yes, you're right... that's what happens if you leave out a few other things... But you're right you said If you buy euro futures you have to have the currency you buy them with. All major currencies are pegged to the dollar... The initial volume is in the futures market
what is the volume there, how many contracts? and what is the volume of forex trading
 
Renat Akhtyamov:

I'm looking at SME....

Still a question - there was some serious buying in the euro on Friday.

How will the EURUSD price react - will it rise or fall?

The CME is just one of several trading venues... And I was watching the Euro on Friday and didn't see much volume there... And about up or down, the question is a bit rhetorical. Potential for longs, but in the moment we have to see how Europe performs in the first hour or two.
 
Anton Govorukhin:
CME is just one of several trading venues.... And I was watching the Euro on Friday and didn't see much volume there.... And as for up or down, the question is a bit rhetorical. The potential is for longs, but in the moment we have to look how Europe works in the first hour or two.

So buy/sell volumes are not the basis for forecasting?

If there was no bidding on the Euro, then let's suppose that it was. And what will happen to the price - will it fall or rise?

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