Uncertainty is so high that Forex traders are paralyzed

Today's data menu is more important than this indicator usually signifies. We get import/export prices and the University of Michigan consumer confidence.

Import/export prices have the potential to trigger Trump's explosion of a dollar that is too strong.

In his reptile brain, he knows that if the Fed is more dovish, the dollar will fall. Given the rise in the dollar, export prices will definitely rise in the latest accounting. Trump can use it to continue his revenge policy, valid or not.

The consumer confidence index is important because market commentators consider consumers to be the last to recognize the global slowdown, ridiculous markets. But consumers are two-thirds of the US economy and once consumers pull their horns, we really are in soup.

This seems like a logical idea, but over the years we have seen consumers wildly off the mark. The sentiment is slow and sometimes never matches economic data until the ceiling falls. Consumer confidence is certainly not the main indicator.

Be careful about drawing any deductions about spending plans or inflation expectations. In March, the index was revised higher to 98.4 from 97.8 early when the index component "current conditions" was stronger than initially thought.

Wait a minute - March is the month when chat about synchronized global slowdown begins to be felt. This goes through the "stupid" consumer completely.

We say that consumers who don't know anything just feel uncomfortable. For one thing, the Michigan survey only included a few hundred people. It can't be representative. In fact, this is a very bad statistic.

Second, this is a telephone survey. Remember how the polls struggled with telephone surveys ahead of the 2016 presidential election. Nate Silver, among other things, wrote a thick book about it. The only people with landlines today are parents.

They may tend to say the economy is good and deserve trust because the stock market is rising. Finally, we want to know what people do, not what they say. When consumers show sentiment, it takes the form of retail sales. And retail sales have faltered since last October.

Other economies were hit by counterbalance too. The old idea - the Australian dollar leads. If the AUD breaks up, the euro is not far behind. This rule really works a little more than half the time, but that leaves many opportunities when it fails.

Uncertainty over the Australian economy is at a seesaw. There are Chinese and raw materials, but also the labor market and housing. RBA claims neutral but locals smell.

Another old rule - when you don't know what the economy proposes for that currency, graph it. Here AUD has an ancient line of support and resistance which shows an upward swing must end.

The upward breakthrough is always possible, of course, but quite funny, ancient support and resistance, which came in and out of favor, happened to be like today. If most traders see charts like this, AUD geese are cooked.

Strategic Currency Direction

We see the same problem with sterling. Some factors are very discouraging, like new business investments, but others show the economy can be chaotic (inflation, increased trade). Brexit must be a heavy rock around the sterling neck, but the pound is much tougher than we think.

We see references to the detention of pounds for 200 days so you should check them out. Sure enough, the pound has been over 200 days for more than a month. 200 days has a zero value as an "indicator."

That means nothing more than "long term." You cannot trade it. But the lure of 200 days remains because so many people talk about it.

On the chart here, 200 days is a green line. We also draw a linear regression channel from the end of the down move (1.2662 on 08/15/18) to the last highest (1.3381 from 03/13/19).

Practically horizontal. This is also not useful because it is too wide and includes more than one trend that is clearly visible.

Quickly, what does this channel say about the sterling line going forward? Nothing, and it's just useless with 200 days. Breakthroughs below 200 days will be shouted at, but do not have predictive values.

The point, perhaps, is that uncertainty is so high that the Forex traders are paralyzed. This ultimately results in a decrease in volatility when many see volatility figures to find out how to trade.

This morning the pound was almost unchanged from yesterday when we typed it in a spreadsheet. Announcement of the delay in Halloween is known, surely, but no reaction in the price indicates an increase in tension that must explode at some point.

Some people call it lethargic or lethargic, but the words have the wrong connotation. "Coiling spring" is the better (by the way, we get a very good metaphor from poundsterlinglive.com). May resignation may not be enough to release spring.

Pound Sterling

With the only currency showing the movement of the yen and the Swiss franc, it is difficult to say how next week will be formed.

Unless Trump makes a new problem with trading with Japan and Europe, we don't see any market drivers. That means slow-moving and sideways markets move in the euro benchmark. Squat down.

So, did you find it helpful? Now I would prefer to hear it from you.