What happens after WRBs?

There were 319 daily bars that met this requirement from April 1, 1999, to Aug. 20, 2004. We measured how the EUR/USD reacted to wide-range bars by tracking its performance from the close of a WRB to the close on each of the following 10 days, as well as the closes of the 15th and 20th days afterward.

The market tended to climb higher, on average, in the two weeks following wide range bars, but the most compelling price moves followed WRBs with strong or weak closes — i.e., closing prices in the upper or lower 20 percent of their daily ranges. The EUR/USD tended to briefly reverse direction in the wake of such bars before outperforming other WRBs in subsequent weeks.

Because surprises in U.S. economic data such as Federal Reserve Bank announcements, gross domestic product (GDP), inflation (CPI and PPI), employment, trade balance and current account deficit impact EUR/USD price behavior, we also specifically studied WRBs that occurred on report release days. Roughly one-third of 80th percentile WRBs included some type of economic data released that day. The reports tended to enhance price patterns, producing larger gains or losses than either regular WRBs or those with extreme closes did alone.