Historical patterns

Table 2 shows the average point (tick) moves for euro futures at different entry times and holding periods (two, three, and four hours) throughout the day from June 1, 2004 to March 31, 2007. Positive values represent an up move and a potential long signal; negative values represent a down move and possible short signal. Over the last three years, eurocurrency futures have tended to sell off at 6 p.m. ET, which corresponds to the open in Sydney.

However, these markets tend to rally after 9 p.m. when all Asian markets are open. The uptrend continues for a few hours and ends at midnight in New York as the calendar changes to a new day. Although there is little overall change in both markets by midnight, these initial patterns — opening weakness followed by a bullish move — are hard to ignore. The Asian session is typically the slowest of the three
major regional markets (Asian, European, and U.S.). Table 2 confirms that all average moves starting from 11 p.m. to 2 a.m. ET (noon to 3 p.m. in Tokyo) are less than 2 points.

The market tended to sell off again from 5 a.m. to 7 a.m. when early U.S-based traders overlap with the European trading day, and short-term money flows from Europe to the U.S. to speculate ahead of major U.S. economic releases such as unemployment, gross domestic product (GDP), and inflation. Finally, around 11 a.m. ET, the euro strengthened against the U.S. dollar when the European equity markets begin to close.

Table 2 contains several moves that are larger than three points. These offer the best potential profit opportunities after slippage and commissions. The system focuses on Table 2’s four most attractive moves, which are shown in Figure 1. The euro fell an average 3.06 points from 6 p.m. to 9 p.m. ET and climbed 4.16 points from 9 p.m. to midnight. At 5 a.m., Eurocurrency futures dropped another 3.15 points in the next two hours before rallying 3.30 points from 11 a.m. to 3 p.m.