AUD/USD intraday seasonality overview, 2003-2010

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Written by Forex Automaton   
Monday, 10 January 2011 17:24
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AUD/USD intraday seasonality overview, 2003-2010
Variances and correlations
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A notable stable effect on the hour scale in AUD/USD is mean-reversion dominance during the morning hours of the Asia-Pacific trading session. Qualitatively this is common to all exchange rates studied in this set of reports so far, but quantitatively, the 1-hour negative autocorrelation is very strong in AUD/USD. The pattern of residual non-zero average hourly returns in AUD/USD in 2003-2010 is similar to AUD/JPY.

The report uses hourly data from January 1st, 2003 through December 7, 2010.

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 because it allows one to split the forex week into 5 non-interrupted full 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.

AUD/USD averaged log return vs CET hour of the day, in 2003, 2004, 2005, 2006 1.1 AUD/USD averaged log return vs CET hour of the day, in 2007, 2008, 2009, 2010 1.2 AUD/USD 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 (see time conversion table for other time zones) for AUD/USD. 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 AUD/USD. The log return behavior that takes place in a relatively low-liquidity market during the "forex night" between 19:00 and 3:00 very much resembles what has been seen in AUD/JPY. During the "forex day" between 3:00 and 19:00 CET, AUD/USD predominantly moves upward. The hourly averages can be as high as 2 pips in either direction.

AUD/USD also seems to be taking a "lunch break" during the hour finishing at 12:00. During this "lunch break", AUD/USD moves down. This is a multi-year effect. This effect is stronger in AUD/USD than in AUD/JPY.

Last Updated ( Thursday, 10 February 2011 09:46 )