FedWatch Companion - ZQ Fed Funds Futures Curve

FedWatch Companion - ZQ Fed Funds Futures Curve

This indicator plots implied rates from selected 30-Day Fed Funds Futures (ZQ) contracts using the transformation:

100 - futures price

What this script does:
- Lets the user manually select which ZQ contract months to display.
- Lets the user assign an independent year to each selected month.
- Allows mixed-year layouts such as late-year contracts together with next-year contracts.
- Draws a reference band for the current Fed target range.

Why this script is useful:
Many traders are used to thinking in FedWatch terms, but sometimes need a cleaner manual curve view across selected ZQ months and years. This script is designed for that workflow.

Key features:
- Month-by-month manual selection
- Independent year input next to each month
- Easy comparison of implied rates across calendar boundaries
- Simple visual comparison against the current target range
- Useful for manual historical backtesting by selecting specific month/year combinations

How to use it:
1. Turn months on or off in the settings.
2. Choose the year next to each enabled month.
3. Compare the selected implied-rate curves in one pane.
4. Use it to inspect how the market prices different policy horizons.
5. Use custom month/year combinations for manual historical backtesting and past curve review.

Data note:
Displayed values depend on the selected ZQ contracts and on the data access available in the user’s TradingView account.

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Additional macro interpretation

This script can also be used as a practical macro-reading tool for studying how larger market participants price the future path of U.S. interest rates through 30-Day Fed Funds Futures (ZQ).

In the post-pandemic period, markets moved into a more inflation-sensitive regime, with major changes in monetary policy expectations. As the Federal Reserve shifted toward higher rates and tighter financial conditions, the relationship between Treasury yields and the U.S. dollar often became more positively aligned than in earlier periods.

From this perspective, ZQ contracts can provide a useful window into how institutional participants price future policy changes. Each Fed Funds futures contract represents $5,000,000 in notional value, which makes this market especially relevant for observing large-scale expectations and repricing behavior.

How this script can be read in practice

1. Current Fed target range as a reference zone

The current Federal Reserve target range can be used as a central reference zone. When selected contracts move into, above, or below that zone, the user can assess whether the market is pricing stable policy, future hikes, or future cuts.

2. Comparing near and deferred contracts

Comparing near-dated contracts with farther contracts helps reveal how the market prices the future direction of policy.

- If deferred contracts trade above nearer contracts, this may suggest that the market expects higher policy rates ahead.
- If deferred contracts trade below nearer contracts, this may suggest that the market is pricing future cuts.

3. FOMC repricing

This script is also useful around FOMC meetings and major Federal Reserve events, when implied pricing changes can become especially informative. Watching how selected contracts reprice before and after these events can help users track how expectations are being adjusted.

Manual historical backtesting

A major strength of this script is its usefulness for manual historical backtesting. Because each selected month can be assigned its own year, users can reconstruct past pricing structures and study how implied rate expectations behaved across different macro environments.

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RonyGoldmann

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RonyGoldmann