What’s the Reason Behind This Price Movement ?

By | April 1, 2015

I’ve made the case before that trying to provide reasons for why a financial instrument (currency pairs, indices etc) moved the way it did in a short period of time is impossible. It could be argued that in certain cases, at best, it’s an educated guess. But most of the time it’s just an exercise in filling up web pages or TV airtime.

You might know that a couple days ago, on March 30th 2015, the former Federal Reserve chairman, Ben Bernanke, started his own blog. As it happens, on that day we also had a seven year high in Chinese stocks and a rally in US stocks – 1.5% for the Dow and more than 1% for S&P 500 and NASDAQ. There was a very funny tweet in my twitter feed that perfectly mocks this attempt to always find explanations for price moves:

 ·  Mar 30 “Stocks soar on Bernanke’s first blog post”
What made me harp on this subject again is a title I noticed on ForexLive: ‘ForexLive European morning wrap: Pound takes another beating as UK election fears prevail ‘. Of course that’s just an unsubstantiated argument, just as good as any other – why didn’t the election fears prevail yesterday or the day before ? What made them prevail exactly this morning ?
In the spirit of the tweet above, I will give you the real reason why the pound fell today: traders and investors got spooked by the following headline, right at the top of today’s DailyMail online edition:
Britain’s most shameless dad: Man has 40 children by 20 women – and can’t remember all of their names – says: ‘I’ll never stop because God says go forth and multiply’
I invite the editors from ForexLive to prove me wrong. :)

3 thoughts on “What’s the Reason Behind This Price Movement ?

  1. Alex

    Yeah, I agree, most of the price moves are noise because of many participants act with different motives. However there are important moments where big market players focus on and if there is a surprise, you have big moves. For example GDP US this Friday 26.2.2016. Nice pips on shorting EUR USD.
    Or famous Draghi conference in December 2015 where almost everybody was short EUR USD into the event and Goldman Sachs even said that they expect 300 pips move down. When Draghi did not do what market imagined, nice pips was made by nimble traders on the way up.

    I agree all the writers need to fill up their newsletters, blogs etc with reasons for the everyday small moves. But anybody with a working brain will not buy into it.

    Reply

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