Economic exposure Reflects the impact of foreign exchange changes on the future competitive position of a company.
Elliott Wave Principle A system of empirically derived rules for interpreting action in the markets. It refers to a five-wave/threewave pattern that forms one complete bull market/bear market cycle of eight waves.
Envelope model A band created by two winding parallel lines above and below a short-term moving average that borders most price fluctuations. When the upper band is penetrated, a selling signal occurs; when the lower band is penetrated, a buying signal is generated. Because the signals generated by the envelope model are very short-term and occur many times against the ongoing direction of the market, speed of execution is paramount.
Eurocurrency Currency deposit outside the country of origin.
Eurodollars U.S. dollar deposits placed in commercial banks outside the United States.
European Coal and Steel Community European entity established in 1951 by the Treaty of Paris, with the purpose of promoting inter-European trade in general, and eliminating restrictions on the trade of coal and raw steel in particular. West Germany, France, Italy, the Netherlands, Belgium, Luxembourg, and Great Britain formed this community.
European Commission The executive body of the European Economic Community in charge of making and observing the enforcement of policy. It consists of 23 departments, such as foreign affairs, competition policy and agriculture. Each country selects its own representatives for four-year terms, but the commissioners may only act for the benefit of the community. The commission is based in Brussels and consists of 17 members.
European Court of Justice The European Economic Community body in charge of settling disputes between the EC and member nations. It consists of 13 members and is based in Luxembourg.
European currency unit A basket of the member currencies. As a composite unit, the ECU consists of all the European Community currencies, which are individually weighted. It was created by the European Monetary System with the eventual goal of replacing the individual European member currencies.
European Economic Community A community established by the Treaty of Rome in 1951, with the goal of eliminating customs duties and any barriers against the transit of capital, services, and people among the member nations. The signatories were West Germany, France, Italy, the Netherlands, Belgium, and Luxembourg.
European Joint Float Agreement European monetary system established in April 1972 by the EC members: West Germany, France, Italy, the Netherlands, Belgium, and Luxembourg. Great Britain, Ireland, and Denmark were admitted by January 1973. The agreement allowed the member currencies to move within a 2.25 percent fluctuation band (nicknamed the snake). As a joint group, the agreement allowed these currencies to gyrate within a 4.5 percent band (nicknamed the tunnel). The entire agreement was known as the snake in the tunnel.
European Monetary Cooperation Fund EMS fund established to manage the EMS credit arrangements.
European Monetary Institute (EMI) The new European Central Bank created to govern the EMS. As of March 1994, it did not have any power over inter-EMS monetary policy.
European Monetary System European monetary system established in March 1979 by seven full members: West Germany, France, the Netherlands, Belgium, Luxembourg, Denmark, and Ireland. Great Britain did not participate in all of the arrangements and Italy joined under special conditions. New members: Greece in 1981, Spain and Portugal in 1986. Great Britain joined the Exchange Rate Mechanism in 1990. Also in 1990, West Germany became Germany as a result of its political unification with East Germany.
European Parliament The European Economic Community body in charge of reviewing and amending legislative proposals. It has the power to reject the budget proposals. It consists of 518 members who are elected. It is based in Luxembourg, but the sessions take place in Strasbourg or Brussels.
European Payment Union European entity instituted in 1950 to facilitate the inter-European settlements of international trade transactions.
European-style currency option the expiration date.
European Union Treaty
February 1992 in the Dutch city of Maastricht, with the stated goal of forming a "closer union among the peoples of Europe."
Exchange for physical (EFP) Consists of deals executed in the cash market, outside the exchanges, for amounts equivalent to the currency futures amount, on forward outright prices valued for the futures' expiration. EFPs are generally quoted by commercial and investment banks, even during regular trading hours.
Exchange rate risk (1) Foreign exchange risk that is the effect of the continuous shift in the worldwide market supply and demand balance on an outstanding foreign exchange position. (2) Trading risk pertinent to market fluctuation.
Exercise (strike) price The price at which the underlying currency will be delivered upon exercise.
An option that may only be exercised on
Treaty signed by the 12 EMS members in Exhaustion gap Price gap that occurs at the top or the bottom of a Vreversal formation. The trend changes direction in a rather uncharacteristically quick manner.
Expanding (broadening) triangle A triangle continuation formation that looks like a horizontal mirror image of a triangle; the tip of the triangle is next to the original trend, rather than its base. (See Triangle.)
Expiration date The delivery date.
Exponentially smoothed moving average A moving average that also takes into account the previous price information of the underlying currency.