Inventory pressure late in the day

[Fairman]

Inventory pressure late in the day

Dealers end the day with positions they'd prefer not to carry overnight. In the late New York afternoon, they trim inventory, and the flow can push prices in a way that has nothing to do with fresh information.

The effect is subtle. If clients bought a lot of EURUSD during the day, dealers are short and may buy it back toward the close. The buy flow props up the price in the last hour, only for it to drift back after the rollover.

Retail traders see this as a late-day drift that reverses overnight. It's one reason that end-of-day trends are less reliable than mid-day ones.

The amount of inventory dealers carry depends on volatility and risk limits. In calm markets, they tolerate more. After a big move, they cut positions quickly.

It's hard to measure from outside, but some clues exist. A late-day grind in one direction on low volume, with no news, is a candidate. The reversal often shows up in the early Asian session.

Treating the last hour before rollover as a separate regime with its own rules, rather than as an extension of the afternoon, matches the way flows work.

In the last hour of the New York session, is there a pattern that vanishes after rollover?