How the number is built
Take a currency, say the euro. Look at every pair it trades in against the other majors, measure the percentage move over a chosen period, and average them. Do that for all eight and you can rank them from strongest to weakest. That is a strength meter, whatever the styling around it.
Two choices decide what you see, and they are usually hidden:
- The period. One hour, one day, one week: each gives a different ranking, and a currency can be top of one and bottom of another.
- The basket. Only the majors, or exotics too? Each pair weighted equally, or by how much it trades?
None of that is wrong. It just means the number is a measurement of the past, under a set of choices you did not make.
What it is good at
A meter is quick. It tells you which pair had the widest spread of movement this week, which is often where the clean trends are. It is a decent confirmation tool: if you already think the pound should fall, and the pound is bottom of the list, price is agreeing with you.
Three things it cannot tell you
Why it moved
A currency can be top of the list because its central bank surprised everyone, or because one big number came in high, or simply because the whole market turned cautious that day and money went to safety. Those three have completely different lives ahead of them. The number is the same.
What is coming
A meter has no calendar. A currency that looks strong an hour before its own inflation figure is not strong, it is waiting. This matters even more for prop-firm traders whose rules limit trading around news.
Whether the move is stretched
Strength is momentum, and momentum runs out. Without a sense of what the move should be worth, a meter cannot tell a move that is just starting from one that has gone too far, which is exactly when chasing it hurts most.
Momentum and macro are different questions
Momentum asks: what has been happening? Macro asks: what should be happening, and why? They answer different questions, and they often disagree for a few days. That disagreement is information in itself: a currency the macro likes but price does not is either an opportunity or a sign that the market knows something your story does not.
Using both, without being led by either
- Start with the macro: which currency has the stronger case, and against which weak one?
- Check the calendar: is high-impact news due for either side in the next day?
- Then look at price: does this week agree? If it does, timing is easier. If it does not, either wait or size smaller.
- Let your own technical work decide entry, stop and target. Neither a meter nor a macro score does that for you.
How MacroSetup handles it
We score each of the eight majors from 0 to 100 on four pillars: how markets are treating risk, the fundamentals behind the currency, geopolitics, and price strength this week. Price strength counts for 5 of those 100 points on purpose. It can confirm the picture or raise a question; it never decides it.
The strength of the week is still shown, right next to the reasons, so you can see when the two disagree. The methodology sets out the pillars, and the track record shows how the daily calls were measured against real exchange rates, misses included.
In short
A strength meter is a speedometer: useful, honest, and silent about the road ahead. Keep it, and put a map next to it.