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Kim Du Toit
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Truth on the Market
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Thursday, March 16, 2006That's Because They're a Pack of Pikers!
Riz at ABOB Capital makes the following observation:
This may of interest to day traders. I've noticed that when a currency appears to be making some kind of obvious pattern, the announcement of economic data often can create a great deal of volatility but then, quite often, the spot rate settles back into completing the original pattern. Today's price action in EUR/USD is a perfect illustration. Before 13:30 (time of current account and retail data), EUR/USD appeared to be appreciating in a kind of horse-shoe pattern. The data created some volatility but after about half an hour, the pattern was firmly back on track. Is this an example of a pocket of predictability in an otherwise unpredictable market. It could be tested for with the right data set.
Here's the deal. The interbank brokers know on which side of the market the volatility lies, re: the "obvious pattern" Riz mentions.
Before key numbers, bid/offers widen. This widening gives the brokers a great opportunity to fade the quote. This, in turn, creates a minor trend. It's not a "pocket of predictability"; rather, it's the confluence of opportunity and unscrupulousness.