The euro dropped to a 17-month low because Spain and France have political problems. Retail traders are now staring at their screens wondering if they should've paid attention in geography class. They shouldn't have. Geography won't save them.
Here's what happened: two countries that use the same currency are experiencing what financial journalists call "political and fiscal concerns." That's code for nobody knows what the f*ck is happening but we need to fill column inches. The euro fell. Traders panicked. The head-and-shoulders pattern they drew last week didn't mention anything about Spanish fiscal policy.
Some guy in Ohio just sold his entire position because a headline used the word "uncertainty." He'll buy back in three days from now when a different headline uses the word "stability." The price will be identical. His account will be smaller. This is called active management.
The truly beautiful part is watching technical analysts scramble to explain why their Fibonacci retracement levels didn't account for parliamentary elections. They'll draw new lines. The lines will be very convincing. They'll intersect at important-looking angles. None of this will matter because the 50-day moving average doesn't read Le Monde.
France could elect a golden retriever as president and the euro would either go up or down. Spain could decide to bring back the peseta and the euro would either go down or up. Your candlestick patterns will confirm the move exactly twelve hours after it happens. You'll call this analysis.
Political uncertainty is just market noise with better branding. The euro was at this exact level nine months ago when everyone was certain about everything. Nobody made money then either.
Photo by Calvin Hanson on Unsplash
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