Intraday Patterns In FX Returns And Order Flow

Using 10 years of high?]frequency foreign exchange data, the authors present evidence of time?]of?]day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours. They confirm this pattern across a range of currencies and find that, in the case of EUR/USD, it can form a simple, profitable trading strategy. They also find that this pattern is present in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours. Data from alternative sources appear to corroborate that interpretation.

Provided by: Swiss National Bank Topic: CXO Date Added: Nov 2010 Format: PDF

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