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If you are described as having your ‘head in the clouds,’ it means that you are unaware of what is going on, because you are daydreaming. For instance:
“Oliver wasn’t paying attention: he has his head in the clouds.”
The phrase can also be used to describe someone who is impractical, or living in a fantasy. For example:
“I don’t think I can take you seriously, you have your head in the clouds.”