The ShadowTraderPro F/X Trader is your daily companion to the foreign exchange markets. Each issue contains a look at an emerging currency trade setup from a technical perspective, along with selected news on the four major pairs and a full economic calendar specifically tailored to the Forex trader. The report also contains potential F/X trade setups which are listed with defined entry, defined target and defined stop. Subscribers receive email confirmations and updates on these trades so that they can follow along.
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Dollars & Sense
Good Afternoon, Forex Traders. The equity markets surprised everyone with a strong rally fueled by positive news in the banking sector. The bull run in the markets and the drop in volatility brought about more directional movement than we had anticipated going into the holiday weekend. The EUR/USD sell stop was triggered and then there was a slight pull back before the U.S. markets closed.
Remember that the of the major 8 markets are closed Friday for Good Friday except for Japan and Monday all but Japan and the U.S. are closed. When the world markets are closed, usually volatility and price action are minimal. On occasion, however, there have been random volatility spikes.
The EUR/USD triggered our sell stop putting us in a slightly less confident position. If this price action happened during a regular week, this would not bother us in the least. The rally in the equity markets gave a boost to the dollar and triggered the trade at the end of the market day. The price pattern now appears to be a text book head and shoulders formation. A head and shoulders formation will usually run the distance from the top of the head to the neckline, if it breaks the neck line. But which is the neckline? The 1.3175 or the 1.3145? In either case, we are in the trade with the anticipation of continued directional movement down. We will need to manage this trade. If there is any significant price action tomorrow or Friday, we will exit or tighten the stop. If we carve out a lower high or break through the lows with any force, we may expand the target and let this run for the full distance of 400 pips. Note, we removed our live call long position. (see EUR/USD below)
The USD/JPY approached our trigger but didn't reach high enough. That being said, the Japanese market is the only one open both Friday and Monday. This allows us to leave our trade on going into the weekend. Volatility, as defined by the VIX, broke key support levels today. Lower volatility historically means weaker yen, which supports our trade. The analysis for yesterday will stand unless we send out an advisory cancelling the trade. (below).
The GBP/USD continued flat, building up further pressure for next week. Keep an eye on commodity prices as a bump in crude oil prices could break this trade out to the top side. Lower volatility, however, could see a pull back in commodities and a continued run for the dollar, a break below our support may encourage some confidence into a short position on this pair. For the time being, we still wait. (see GBP/USD below).
Major Pair Scoop
(Reuters) - The U.S. money market showed some improvement on Thursday, as dealers chose not to borrow securities from the U.S. Federal Reserve to raise cash and data showed a rebound in commercial paper activity.
Across the Atlantic, banks lowered what they charge each other for dollars, euros and sterling in the London Interbank Offered Rate (Libor) market, reflecting greater risk appetite tied to optimism for a recovery in the banking sector and U.S. consumer spending.
This upbeat outlook sparked a rally on Wall Street and in other risky assets like corporate bonds.
"They are all positive signs. We hope to see more of them going forward, but we need to see a lot more of them," said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey.
As credit supply rises from the nadir of the financial crisis, dealers are relying less on the Fed as their last resort to borrow securities to raise cash or to cover short positions.
On Thursday, bond firms submitted no bids at the Fed's daily auction for them to borrow Treasury holdings overnight. The last time such a no-show happened was March 23, 2007, according to the New York Fed.
The dearth of dealers repeated what happened last week at an auction that lets dealers borrow the Fed's Treasuries for 28 days. It also coincided with the Fed's increasing its minimum fee rate for dealers to borrow its Treasury holdings.
F/X Economic Calendar
Up and coming economic data relative to f/x markets that may move markets this week.
| Date | Time (GMT) | Currency | Description | Importance | Forecast | Previous |
|
4/10/2009 |
all day |
|
GOOD FRIDAY -- Equity Markets Closed |
medium |
|
|
F/X Trader Live Calls
Note: As currency markets are open around the clock, some action in plays can and will occur outside of U.S. trading hours. Please note that emails are only sent to clients between the hours of 9:00am EST to 5:00pm EST, Monday through Friday. Any trade action happening outside of these hours will be confirmed in an email the following morning.
Long Ideas
| Symbol | Trigger Price |
Stop Price | Target Price |
Notes |
|---|---|---|---|---|
| USD/JPY | 100.78 | 100.08 | 101.44 | We approached resistance but no trigger. A break above resistance sets up a trade that may look like a tight risk to reward ratio but we will manage and trail the stop immediately after entry. |
| Symbol | Trigger Price |
Stop Price | Target Price |
Notes |
|---|---|---|---|---|
| none |
F/X Trader Portfolio
| pair | dir | size | date entered |
entry price |
date closed |
exit price |
target | stop | status | mark to market |
p&l pips |
p&l capital |
capital commit |
OPEN POSITIONS - week of 04/06 - 04/10 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EUR/USD | short | 1 | 04/09/09 | 1.3130 | n/a | n/a | 1.2835 | 1.3205 | open | 1.3164 | (34) | ($34) | $131 |
 |
|||||||||||||
| CLOSED POSITIONS - week of 04/06 - 04/10 | |||||||||||||
| GBP/USD | short | 1 | 04/06/09 | 1.4780 | 04/07/09 | 1.4651 | n/a | n/a | closed | n/a | 129 | $129 | $148 |
| |
Modified profit target hit, exiting trade with profits. | ||||||||||||
| EUR/USD | short | 1 | 04/07/09 | 1.3333 | 04/08/09 | 1.3300 | n/a | n/a | closed | n/a | 33 | $33 | $133 |
| |
Tightened stop hit with volatility. Exited with 33 pip gain. | ||||||||||||
| USD/JPY | short | 1 | 04/07/09 | 100.59 | 04/08/09 | 100.75 | n/a | n/a | closed | n/a | (16) | ($16) | $100 |
| |
Tightened stop hit, exiting trade for a 16 pip loss. | ||||||||||||
Click here for F/X Trader Performance - 2008