GBP/USD intraday seasonality overview, 2003-2010 |
Written by Forex Automaton | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tuesday, 28 December 2010 15:52 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Page 1 of 2 This GBP/USD report continues a new series of reports about intra-day "seasonality" effects in FX, gathering facts on the ground for an upgrade of the hour-scale algorithmic forecasting system. From the point of view of this approach and the features it reveals, GBP/USD is somewhat similar to EUR/USD. 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 chosen for the following reason. Forex week begins, roughly speaking (since the volume increase is gradual) on Sunday 5pm and ends Friday 6pm Eastern time. It is convenient to define this week to consist of 5 full days, from 6pm Sunday to 6pm Friday New York time. When it's 6pm in New York, it's midnight in Berlin, Paris, Madrid, Rome, Geneva and Frankfurt. These cities use Central European Time or CET. Therefore, the convenience of using CET is that one gets 5 non-interrupted, full 24-hour long trading days per week. Table 1 is a conversion table for the four time zones including major trading centers of the world.
To look for seasonality effects in first-order statistics (averages), we average logarithmic returns for each hour of the day separately using profile histograms. The resulting histograms are plotted in Fig.1. Fig.1. Averaged logarithmic return vs hour of the day in CE time for GBP/USD. 1.1: Years 2003, 2004, 2005, 2006. 1.2: Years 2007, 2008, 2009, 2010. 1.3: All years added. Vertical bars show precision of the mean. 1.4: Years 2003-2010, showing the time window of the highly consistent behavior only. Hatched bands in the plots are twice as wide as the measurement's precision of the mean. The mean is the middle of the band. Because hourly returns do not have Gaussian distributions, the usual quantitative rules of thumb about confidence intervals and confidence probabilities do not apply here. Nevertheless, stability of the effect in panel 1.4 is hard to deny. Fig.1 presents hourly "seasonal" averages of the hourly logarithmic return in GBP/USD. There is a considerable variation among the patterns, and like EUR/USD, the 00:00--4:00 slot (ends included, hour quoted indicates the end of the time interval for which the returns are averaged) seems to be the time window where the same pattern of non-zero residual average tends to reproduce itself year after year. Fig.1.3 reveals a non-zero residual pattern surviving after aggregating the yearly data. |
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Last Updated ( Thursday, 10 February 2011 09:46 ) |