Unlike the equity exchanges, the
Foreign Exchange market is open for trading on a 24 hour basis throughout the
week. Brokers normally close operations late on Friday, GMT time, and open
again for trading late in the evening on Sunday GMT time, when the first Asian
session of the week begins. On Mondays, at around 8:00 AM, London traders get
to their desks and buying and selling of currency pairs gets going again in
earnest for the week.
Apart from the close late on Friday
to the open the following Sunday evening (GMT), the Forex market looks to be
continuous, and it normally is. But there are certain occasions when, for
technical reasons, trading takes on a special significance. One such is known
as the fixing time. There are a number of these throughout the global day, most
notably in Tokyo, in the Chicago futures market, and in the most important
Forex market, the one in London. Fixing time in London is at precisely 4:00PM,
or 16:00 hours (at the time of writing this, even though we are referencing
London where Greenwich is situated, we cannot say that this is Greenwich Mean
Time (GMT), because London is on GMT + 1 hour in order to facilitate daylight
saving arrangements). The fix is when commercial buyers of currencies can carry
out their transactions at a time that would correspond to the closing price for
the day if it were equities that were being traded. The daily mark-to-market
requirements of such funds that carry Forex positions are also taken care of by
reference to the exchange rate at this time.
Big
moves in EURUSD at recent London Forex fixing
Although the London fix is normally
completely transparent as far as non-institutional Forex traders are concerned,
there were two consecutive days recently when the fix became very noticeable
indeed. These days were Thursday 10th and Friday 11th of
this month, September 2015.
The chart at the top shows the first
day, and the one directly above the following one. In each case the Euro
started to strengthen appreciably against the dollar at the precise moment of
the London fix. On the Friday, there had been an economic report, the Reuters /
University of Michigan Consumer Sentiment Index, one hour earlier, which has
been known to move the market in those currency pairs that involve the US
dollar, and one could have been forgiven for thinking that the move seen on the
chart was a delayed reaction to this. But it was not. On both days it appears
that there was a decided imbalance in EURUSD orders that were placed to
coincide with the London fix. In each case this caused the EURUSD pair to rise
in a dramatic manner.
Does this happen often? In a word,
no. Using the historical analysis capabilities of the OmiCronFX Mandelbrot
routine, we were able to ascertain that the price action on the two days in
question was unique in the mid-to-recent past.
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