Tag Archives: Shaun Downey

Last week Currensee Chief Market Analyst Shaun Downey wrote a blog post titled A Maze of Counterintuitive Forces: Volatile Sideways Ahead? There were a couple of things in there that I disagreed with, so I decided to take the opportunity to present my own view point. You can decide which one you prefer, or if you think both of us have no idea what we're talking about. J

Mortgage Rates to High
Shaun made the comment that mortgage rates remain stubbornly high and that even though they have fallen, it apparently isn't enough to induce an increase in mortgage applications. Seeing as the rates have recently been making all-time lows, I have a hard time agreeing that they are stubbornly high.

Speaking to the mortgage applications, consider two things. First, the tax credits pulled forward a lot of home buying activity, and the numbers have been reflecting a drop off since the credit expired. That was something inevitable and very little related to mortgage rates. Second, the potential home buying public is experiencing a quartet of symptoms helping to keep their activity down. They are:

  1. Fear prices may yet go lower again (or at least not rise for a while),
  2. Impaired personal/family balances sheets and credit ratings,
  3. Being gun shy about borrowing for anything at this point, and
  4. The belief that banks just aren't lending. Again, none of this has anything to do with mortgage rates.

Fed Capping Long Rates

Assuming you agree that rates are too high, Shaun's solution to the problem he sees is having the Fed cap long term rates, maybe at something like 1.5% for 30-year money. If, as Shaun has suggested, mortgage rates are too high then lowering long rates would help. Standard fixed rate mortgages are closely linked to the rate on the 10-year Treasury Note. If that can be pushed down, then mortgage rates would likely follow (falling 10yr rates is exactly how mortgages have been making record lows of late). There are several problems with this plan, though.

At the top of the list is the fact that the Fed cannot simply cap long rates. There is no long-term equivalent to the discount rate they can just set at 1.5%. Long rates are determined by the market.

If the Fed really wanted to drive 30-year rates down to 1.5% it would have to embark on a massive quantitative easing (QE) program of buying Treasuries. Keep in mind the $1.2 trillion the Fed spent buying mortgage securities, plus the hundreds of billions it put in to Treasuries last year. You could maybe say that knocked 80bps off 10yr rates at the most positive. After the Fed stopped buying, the 10yr rate went right back up and eventually made a new high before it rolled over into the current downtrend, which has nothing to do with the Fed buying.

If the Fed were to go back into the market to buy Treasuries and drive long rates down to 1.5% it would send alarm bells ringing across the financial universe. The dollar would get hammered (currency traders hate QE), which wouldn't help any other global economy, perhaps aside from China (because of the close dollar peg for the yuan). That, in turn, would likely drag on global stock markets, especially for exporters to the US.

A sharp move lower in the long end of the yield curve will also flatten it. A strongly up-sloped yield curve tends to be an economic positive. A flat, or negatively sloped curve is generally the opposite.

And then there are the bond vigilantes. These are the folks who sound the alarms and sell fixed income securities when they perceive a risk of inflation. If the Fed starts a major new QE effort you know the vigilantes will be screaming and yelling about the inflationary implications of monetizing the debt. In order to neutralize the QE the Fed would have to perform massive short-term draining similar to what the ECB has been doing to sterilize its bond purchases. That would tend to put upward pressure on short rates, getting us back to the flattening yield curve.

If the Fed didn't do that then you get a big spike in the monetary base, which will worry the inflation hawks. The money multiplier isn't working real well right now, but the fear will be that eventually there will be a massive explosion in M2/M3 type of aggregates as the borrowing/lending contraction loosens up, which would lead to a spike in inflation (already the fear, actually). That could end up leading to big players shorting T-Bonds and T-Notes, which would make it harder for the Fed to drive rates down – kind of like how some big players in the forex market play against central bank intervention.

And to top all of this off, anything the Fed does will tend to create market distortions. It's happened in the mortgage market now, to the extent that the Fed has had to rearrange its holdings to allow for more supply of certain securities in the market so they can trade and be held in portfolios. If the Fed holds most of the T-Bonds and T-Notes in existence, as it would likely have to do, it will put a squeeze on those who need to hold them in their portfolios (bond funds) and others who need them for other purposes.

That said…

This is just my view on things. Feel free to tell me I'm crazy. Differences in opinion are what make the markets so interesting.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Thank you to everyone who attended Wednesday's webinar. Shaun's presentation and questions from the audience made for a great discussion. We have posted the full webinar below. Thanks again for your participation.

Analyzing Forex Market Trends with Market Profile webinar with Chief Analyst Shaun Downey.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Currensee Chief Market Analyst Shaun Downey presents an introduction to Market Profile for Forex Traders.

When: Wednesday, July 21, 2010 8:00 AM - 9:00 AM EDT

Sign up here.

Market Profile has evolved from a simple day trading tool that was created by hand to a set of sophisticate concepts for analyzing trends in order to understand where price can trend quickly and where it must pause or reverse.  The framework of "Price + Time = Market Acceptance" provides guidance for the trading day and highlights times and places where the trader must be active and connect with their existing methods of entry and exit. Market Profile also clearly defines stops.

In this webinar, suitable for all levels of traders, Shuan Downey will explain...

  • How he created his own Market Profile trading rules
  • What are the building blocks of a sound trading system
  • How to understand the connection between long-term profiles and short-term movements to select entries and stops

All webinar attendees will get a PDF sample from Shaun's book, Trading Time: New Methods in Technical Analysis and a special offer from the Currensee marketplace.

Sign up here.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

In case you haven’t picked up FX Trader Magazine yet (how could you miss it?), Currensee’s very own Chief Market Analyst and Head Pip Shaun Downey is featured in the latest edition covering the true meaning of overbought and oversold. As a newbie trader myself, one of the first concepts I drilled into my head was the Stochastic 80/20 and RSI 70/30 rules for identifying overbought and oversold. It’s simple, it’s concrete, and best of all, it relies less on my instinctive aptitude as a trader and more on my ability to read a semi-complex chart.

Is the ideal trading strategy built on the backbone of Stochastics and RSI? No, and Shaun will be the first to tell you these indicators by themselves can be “lazy and inaccurate”. But then again, you can really say that about pigeonholing yourself to any one indicator as a tell-all trading signal. From the MACD to Elliott Wave, every indicator can only tell you so much.

According to Shaun,

“The indicators of choice have limits of scale and the market in theory can move anywhere and often can do it very quickly.”

The most experienced traders spend years tweaking, abandoning, and perfecting trading strategies that are not only the right mix of indicators, but also weighing the importance of those indicators. It’s part alchemy, part art form.

If you haven’t come across Shaun’s take on overbought and over sold, we suggest reading it. If you want to see what strategies keep thousands of Forex traders tickin’ and pippin’, join them.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

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Tomorrow afternoon we're putting on a special free show, a Forex panel discussion webinar called Are you a Scalper, a Swinger, or a Holder? with John Forman, Shaun Downey and Mike Baghdady. Please join us as these experts help us explore the different timing approaches to Forex trading .  We've got some basic questions for the panel, but the main event will be opening up the lines to your questions, live!

Are you a scalper looking for the rush of that immediate and fleeting opportunity? Do you look for short-term misalignments in price and grab a few pips of profit in positions that frequently last only seconds? Are you a swinger with a more patient strategy to examine patterns over days, or weeks? Or are you a holder, keeping your positions safely stowed away until the broader and more fundamental plays can be made? If you are not any of these, you are probably someone who bets on a good night’s sleep.

Please join our expert panel tomorrow, Tuesday, April 27, at 1:30pm Eastern time:

  • Mike Baghdady, SpyGlass Trading: Baghdady is the world's foremost expert on Price Behavior and a 33-year veteran of the global financial markets, spending the tail-end of his professional career on the NYBOT trading floor until its merger with the InterContinental Exchange.
  • Shaun Downey, CQG and Currensee: As Chief Market Analyst at Currensee, Shaun brings his extensive knowledge of both the fundamental and technical Forex arena to provide commentary, insight and trading strategies to the Currensee trader network and the Forex industry at large.
  • John Forman, Thomson Reuters: Forman is a Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Perusing the Wall Street Journal, we were pleased to see Currensee's Chief Market Analyst, Shaun Downey, quoted in reference to the Canadian Dollar's crossover into parity territory with the greenback

"CQG's Downey said a close below C$1.0000 would target a move to C$0.9740. A move through resistance at the top of the recent range would clear a path to $1.0264, he said.

'When it breaks, you're looking for a reasonably big move, that's for sure,' Downey said."

You may remember that we had a guest post last week by Yohay Elam discussing Kathy Lien's post about the USD/CAD.  Yohay suggested that the CAD would probably gain strength on positive news, but the WSJ called the move "little changed" even after good trade reports.  Many - including Downey - are waiting for a bigger move yet to come, but which way?

Taking a quick peek at the Currensee dash and social indicators, we can see that the community is split with about 1/2 of the volume short and winning, but only 1/3 of the positions in the black.  Checking out the leaderboard, we can see that seven of the top 20 traders by performance are trading the USD/CAD, a higher rate than the community at large.  If you were trading friends with those top traders, you'd have an idea of which way they were leaning on this pair.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

We had some great questions last week on our Facebook Fan Page around Fibonacci retracements. In the video below, Shaun Downey goes into great detail the concept behind trading forex using Fibonacci retracements. Shaun explains common fibonacci ratios used as well as methodology and strategy. At the end of the video, Shaun analyzes and applies Fibonacci retracements to a EUR/USD chart.

If you are new to forex trading or would like a good overview of how traders are using Fibonacci retracements, take a few minutes and watch Shaun's video. If you prefer Elliott Wave analysis, we have that covered too. Join us for our Elliott Wave Webinar on Thursday, March 18th at 3 PM EDT. Enjoy!

For better quality, Watch on Facebook.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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As part of showing the love to our 1,500+ fans on the Currensee Facebook Fan Page, we have been running weekly question and answer sessions with Currensee's Chief Market Analyst, Shaun Downey.

If you have a question you would like Shaun to answer via a video response, please post it under the Discussions Tab on our Facebook Fan Page.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

We are trying something new this week. We know that every Forex trader has questions. From macroeconomic trends to trading strategies to managing risk, Forex trading can be overwhelming at times. That is why we are here to help.

Starting this week, Forex traders can post their questions to our Facebook Fan Page and Currensee’s own Chief Market Analyst, Shaun Downey, will answer them for you via a video response. We will be doing these Question & Answer sessions on a weekly basis, so anytime you think of a question, be sure to post it to our Facebook Fan Page.

Have questions? Post your questions now…

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Our Chief Forex Market Analyst Shaun Downey has a new blog post over at Forex Magnates called Using Forex to take advantage of a two tier world in which he runs down some major macroeconomic numbers and their impact on various currencies and pairs.  For Shaun, things seem to break down East/West, with "the East powering ahead" and "the US and Europe still much in the same mire."

We're looking forward to seeing Shaun in person next month in New York City when we'll have some exciting news at the International Traders Expo and IB TimesFX show.  More on that soon... until then, we'll leave you with Shaun's words on the Aussie Dollar:

The real opportunities therefore appear with the Australian Dollar against a variety of currencies.  Against the U.S. Dollar it is sitting at the top of the trend so any weekly break to new highs leaves little in the way of resistance all the way to Par. However, with Dollar Yen also in a medium term uptrend whilst above 0.9066, the Aussie Yen is a play that can take double benefit. This week saw the S&P hold key support at 1131 to 28 twice, and whilst this zone holds, it should prevent the normal correlation of the cross showing weakness and a subsequent break of its long standing uptrend. Good support is at 0.8390 and held on the dip yesterday. With the speed of the fall during the credit crunch, it means resistance is light on the way back up (in what I call vacuum down, vacuum up type behaviour), with progress only likely to slow when above 0.9316 on its way to a long term target of 0.9656 to 0.9707. Any failure in the Eurodollar also opens up possibilities in the Euro Aussie.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.