USD/CHF intraday seasonality overview, 2003-2010

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Written by Forex Automaton   
Thursday, 20 January 2011 11:15
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USD/CHF intraday seasonality overview, 2003-2010
Variances and correlations
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USD/CHF tends to show bearish dynamics for several hours following the start of American trading. The European night has a bias towards mean reversion.

The report uses hourly data from January 1st, 2003 through January 1st, 2011.

As always, the quantities we are going to look at are not the actual low, high and close. Since prices are always positive, they are trivially correlated; this feature is absent in the correlations of the so-called logarithmic returns (or logarithmic increments) which are the ratios of price levels (low, high, close) to the values they had during the previous hour-long time interval.

Central European time is chosenĀ  because it allows one to split the forex week into 5 non-interrupted trading days.

Seasonality effects in first-order statistics (means) are straightforward to utilize in trading, therefore one could argue that such effects are not likely to be found. Nevertheless, sometimes such effects are visible and significant. To look for them, we average logarithmic returns for each hour of the day separately using profile histograms. The resulting histograms are plotted in Fig.1.

USD/CHF averaged log return vs CET hour of the day, in 2003, 2004, 2005, 2006 1.1 USD/CHF averaged log return vs CET hour of the day, in 2007, 2008, 2009, 2010 1.2 USD/CHF averaged log return vs CET hour of the day, sum over 2003-2010 1.3

Fig.1. Averaged logarithmic return vs hour of the day in CE time for USD/CHF. 1.1: Years 2003, 2004, 2005, 2006. 1.2: Years 2007, 2008, 2009, 2010. 1.3: All years added. Vertical bars indicate RMS precision of the mean.

Fig.1 presents hourly "seasonal" averages of the hourly logarithmic return in USD/CHF. One curious feature is the time window from 1:00 to 7:00. For many other currency pairs, stable patterns are found in this time window, and for USD/CHF, the pattern looks very stable at least during 2003-2006. It remains visible in 2007-2010 and certainly survives the averaging over all years in panel 1.3.

CHF also seems to be taking a "lunch break" during the hour finishing at 13:00, sharply falling (USD/CHF goes up). Similar effects have been seen in EUR/USD (EUR moves down) and AUD/USD (AUD moves down).



Last Updated ( Monday, 07 February 2011 13:47 )