When the clockstrikes five

They show GBP/JPY rose toward the middle of the week, but they don’t indicate whether Wednesday’s unique rollover affects the pair’s price moves surrounding this event. To find out if this weekly occurrence has influenced GBP/JPY prices, we studied hourly price data from Jan. 1, 2003 to Oct. 31, 2004, or 475 trading days, and divided each day into six 4-hour periods, with the 5 p.m. rollover as the focal point: 1 a.m. to 5 a.m., 5 a.m. to 9 a.m., 9 a.m. to 1 p.m., 1 p.m. to 5 p.m., 5 p.m. to 9 p.m. and 9 p.m. to 1 a.m. the next day.

It shows the average gains or losses for each four-hour period during the entire week (30 total periods), which start and end at 1 a.m. ET on Monday morning. (The forex market is closed from Friday at 5 p.m. to Sunday at 2 p.m. Our data resumed on Sunday at 5 p.m., except between July 18 and Oct. 31, 2004, when it began on Sundays at 4 p.m.)

A distinct pattern appears in the two four hour periods surrounding each day’s 5 p.m. rollover, which is labeled “R”. GBP/JPY gained ground from 1 to 5 p.m. and fell from 5 to 9 p.m. each day except Thursday. Although GBP/JPY continued to rise immediately following Thursday’s rollover, the currency pair’s rally in the eight hours leading up to rollover was three times as large than its post rollover, eight-hour gain from 5 p.m. to 1 a.m. (0.12 percent and 0.04 percent, respectively).

On Tuesday and Friday, GBP/JPY fell throughout the day except in the four-hour period from 1 p.m. to 5 p.m. It also shows that the currency pair’s tendency to rise prior to this event and sell off afterwards has been strongest on Wednesday. The pound/yen increased 0.11 percent in the 12 hours preceding rollover — the figure’s second highest 12-hour gain — and then dropped -0.05 percent in the subsequent four hours. Despite this brief loss, it shows GBP/JPY’s most bullish period occurred from Wednesday at 5 a.m. to Thursday at 9 p.m.

It (see p. 25) compares various statistics for all 30 four-hour periods(average, median, maximum and minimum values and percentage of positive moves). It’s final six rows summarize the pound/yen’s intraday performance. It shows that each period’s average and median values are roughly in line with each other, which indicates GBP/JPY’s gains and losses are fairly reliable. As expected, all but one of the periods’ average gains also have a greater chance of gaining ground than losing it (i.e., the percentage of positive moves is greater than 50 percent).

Similarly, each of their’s average losses has a winning percentage of less than 50 percent.

It’s larger gains and losses also correspond to greater chances of moving in the desired direction. For example, Thursday’s 0.06-percent increases in the two four-hour segments from 9 a.m. to 5 p.m. have two of it’s three highest probabilities of gains (60 and 65.26 percent, respectively).

Wednesday’s shift from a 0.03-percent average gain from 1 p.m. and 5 p.m. to a -0.05-percent loss following the rollover is the second-largest drop off between time segments.

However, the currency pair’s probability of gains sank from 53.68 to 32.98 percent in that same period — it’s largest probability decline. It’s summary statistics confirm GBP/JPY tended to climb briefly prior to rollover and sink after the event. Overall, the currency pair rose 0.03 percent, on average, from 1 p.m. to the 5 p.m. rollover and then fell 0.02 percent in the following four hours.

Although this change is small, the prior period’s biggest individual loss widened from -0.51 to -0.90 percent, and its chance of gains dropped from 56.42 to 45.36 percent following the rollover — two further signs the decline is accurate.

It highlights GBP/JPY’s average four-hour gains and losses on Wednesday and Thursday and compares them to the currency pair’s overall performance. Though the pound/yen’s Wednesday performance adheres to the established pattern, its bullish behavior on Thursday stands out.

GBP/JPY posted average gains in five of it’s six periods on Thursday, which was the only day the currency pair gained ground following each rollover.