ShadowTraderPro FX Trader

The ShadowTraderPro FX 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 FX 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.

U.S. equities collapsed as global recession and debt fears resurfaced, erasing much of last week’s positive moves. The base created last week appears like it is going to be retested by the end of the week. The drop did in the markets gave the dollar a boost but the big boost went to gold prices. Oil prices tumbled over $6 per barrel.

The USD/CHF pair has remained fairly range bound over the last 3 days, as the two currencies appear to be equally matched in the short term. Investors want a safe haven and their confidence does not seem to be favoring one over the other. We are still watching for a pull back while also watching for a break above the falling resistance level. (see USD/CHF below)

The AUD/JPY dipped with the drop in equities today, rising volatility has boosted the yen’s strength. We are watching for the pair to create a higher low and hopefully at the same time the equity market retests support and volatility finds a resistance level. At this point we will look for a bullish trade. (see AUD/JPY below)

The GBP/NZD broke out of the consolidation we were watching and ran a large portion of the expected move up. We are going to try to buy this pair on a dip and retest of the break out. This is a buy limit at 1.9900 with a target of 2.0400 and a stop loss of 1.9400. (see GBP/NZD below)

The EUR/USD bounced off of resistance and fell. This is a strong bounce and the pattern appears to be fairly bearish. We are going to short the pair on an intraday pull back to 1.4380 as a sell limit with a target of 1.4150 and a stop loss of 1.4515 (see EUR/USD below)

Every morning, FX Trader scours the globe to bring you all the news that's fit to pip on the major currency pairs (EUR/USD, USD/CHF, USD/CAD, GBP/USD & USD/JPY).



(Reuters) - Some European banks are being forced to pay more for access to short-term U.S. dollar loans as fresh fears surface over the euro-zone fiscal crisis spreading through the financial sector.

Growing nervousness about another global financial crisis unleashed a massive sell-off in stocks on both sides of the Atlantic on Thursday. Anxious investors piled into safe-haven gold XAU=, Swiss francs currencies/quote?srcCurr=CHF&destCurr=USD">CHF= and U.S. Treasury bills US1MT=RR, whose rates turned negative.

Banks rely on money markets for cash to fund their trades and loans. Fears about the bank system could reduce funding to banks. In the extreme cases such as the days immediately after the collapse of Lehman Brothers in September 2008, investors could stop funding banks completely, wreaking havoc on the entire economy.

The latest wave of anxiety came after The Wall Street Journal reported the Federal Reserve is taking a closer look at the U.S. units of Europe's biggest banks on worries that the region's debt crisis could spread to the U.S. banking system.

HONING IN ON COUNTERPARTY RISK

The New York Fed and the U.S. Treasury have been in close contact with all U.S. banks that have European exposure, urging them to review all levels of counterparty risk they have with European banks, according to a source familiar with the Treasury's and the New York Fed's talks with the banks.

The source said the U.S. banks need to know not only their "first-order exposure" but their "second-order and third-order exposure" to their European counterparties.

The Wall Street Journal report came a day after an unidentified euro-zone bank borrowed $500 million in one-week dollars from the European Central Bank. It was the first time a euro-zone bank tapped the ECB for such funding since February.

Short-term money markets showed further signs of bank stress emanating from Europe's fiscal strains. The benchmark for unsecured dollar loans between banks, three-month Libor LIBOR, rose to its highest in 4-1/2 months, the latest in a series of such peaks.

Investors have not completely cut off funding to European banks, but most of them are reluctant to lend beyond a week.

"Clearly, these euro-zone banks are having a tough time raising money, but it's not at a level that's alarming," said Joe D'Angelo, managing director of money markets at Prudential Fixed Income in Newark, New Jersey, who oversees $50 billion in assets.

French banks, for example, could borrow overnight cash in the repurchase market at about 0.05 percent on Thursday, the same level as U.S. banks. But their borrowing cost for three-month dollars could be 0.30 percentage point higher.

TIERING AMONG EUROPEAN BANKS

There is deepening gloom over the prospects of solving the euro-zone debt crisis after a French-German summit earlier in the week did little to soothe investor concerns that the problems could spread from weaker countries to the heart of the financial system.

Of the 11 European banks that contribute to the calculation of Libor, six are paying above the daily fixing, while the rest are paying below that level.

Foreign banks also reduced issuance of U.S. commercial paper in the latest week as investors became more anxious about the European debt crisis, Federal Reserve data released on Thursday suggested.

"A lot of flows have not returned to the interbank market. Most investors are not very comfortable right now," said Mike Lin, director of U.S. funding at TD Securities in New York.

London interbank offered rates for three-month dollars rose to 0.29778 percent from 0.29589 percent on Wednesday.

UK banks Barclays (BARC.L) and Royal Bank of Scotland (RBS.L) said they paid 0.3400 percent for three-month dollars on Thursday. It was the second-highest rate paid, just behind the 0.34500 percent Japan's Norinchukin said it paid

In the meantime, top French banks have been under intense scrutiny due to their high exposure to peripheral debt.

Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA) were paying for three-month dollars at 0.32500 percent and 0.33000 percent, above Thursday's fixing.

But BNP Paribas (BNPP.PA) said its borrowing cost on three-month dollars was 0.29500 percent, slightly below Thursday's fixing.

The Libor data suggested not all European banks are being lumped into the same risk group, though that is cold comfort for a market where strains are running high.

With the rise in interbank rates and elevated cost to borrow dollars in the currency market EURCBS3M=ICAP, European banks are borrowing in money markets only if they need to do so. Some are said to have already secured longer-term dollars.

"The majority of the European banks have taken care of themselves in dollar funding for this year," said Paul Presinzano, head of short-term dollar interest-rates trading at BNP Paribas in New York.

Responding to the report in The Wall Street Journal, William Dudley, the president of the Federal Reserve Bank of New York, said the Fed is "always scrutinizing" banks and that it treats U.S. and European banks "exactly the same."

The risk premium on two-year U.S. interest-rate swaps over two-year Treasuries recorded its biggest jump in 1-1/2 weeks to 27.00 basis points on Thursday. The two-year swap spread USD2YTS=RR grows with counterparty fears. (Additional reporting by Rachelle Younglai in Washington and Karen Brettell in New York; Editing by Jan Paschal)

Up and coming economic data relative to FX markets that may move markets this week.

Periodically, Blake creates automated strategies on currency ETF's using Prodigio Below are the Wizard Lab (.wiz) files which you can import into your own Prodigio platform. Right click on the links below and save to your local computer. You can then import the strategies into Wizard Lab on your Prodigio Platform. Detailed instructions are in this VIDEO.

This section is for self-directed traders and investors who like to "do it themselves". Every trading day, FX Trader will list long and short currency setups with defined entries and stops. If a play is listed in this section, it should be assumed that FX Trader will be officially in the play if a trigger point is hit. Trades are posted on MyTrade any time that a new play is entered, or changes to an existing play such as movement of a stop occur. Once a trigger price is hit, effectively putting FX Trader "in the play", the play will be actively managed and listed in the FX Trader Portfolio below.

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 posted to MyTrade the following day.

Long Ideas

Short Ideas

The matrix below shows all current ShadowTraderPro FX Live Calls that are in play. Current open positions are on top, with positions that were closed in the current calendar week on the bottom. Closed positions are moved out of the matrix on Monday mornings and posted in our performance page here.

OPEN POSITIONS - week of 08/15 - 08/20
pair	dir	size	date entered	entry price	date closed	exit price	target	stop	status	mark to market	p&l points	p&l capital	capital commit
none

CLOSED POSITIONS - week of 08/15 - 08/20
pair	dir	size	date entered	entry price	date closed	exit price	target	stop	status	mark to market	p&l points	p&l capital	capital commit
none