Trading Like Bacteria – JPY and AUD, EUR and GBP

How does it feel that markets are exhibiting the same patterns as E Coli ? Diarrhea and vomit inducing bacteria ?

It feels just right !

“Using lab-based synthetic biology, experiments in bacterial evolution, and mathematical modelling the study finds links between organisms and markets.

Bacterial investment crashes and boom-bust cycles are described in a paper in the journal Ecology Letters.” Source : BBC

Its a squeeze game, I thought last week, particularly towards the weekend.

Check out the USDJPY and AUDUSD.

AUD vs JPY 30min candle

“August 2013 has been a difficult month for FX trading. Client positioning at the end-July was short EUR, short JPY, short AUD, short GBP and long USD. The corrections so far represent ‘positioning arbitrage’ – where low levels of macro information (which would normally galvanize client flow around a particular macro risk) have led to price cascades and position reductions across the board. The good news for macro traders is the pain may be nearing its end.”

“Calling a reversal on flow is difficult, just because positions are stretched – does not mean one should take a contrarian position.”

So what is the plan ?

Today and tomorrow is EURUSD day after a relatively quiet August. Macro information flooding the market with the CPI, Industrial Production and German Zew. Tomorrow we have their mid year progress report in the GDP.

The charts are showing an inflexion point today after 2 days of losses, similarly with the GBP. Will be keeping my wits about me and trade counter trend post data. The euphoria has been slightly over exuberent. Then again, like the comment above, it is all about positioning and trading against the colony of bacteria to survive !