This blog explains anomalies, which are unique phenomena observed in the forex market. It covers prominent anomalies like the yen appreciation anomaly in August, the impact of presidential elections, and the phenomenon of Gotobi and Wednesday swap, detailing their background and countermeasures. Additionally, it touches on other well-known anomalies, providing a deeper understanding of these phenomena.
1. What is the August Yen Appreciation Anomaly?
The August yen appreciation anomaly is a unique phenomenon in the forex market. Based on empirical rules and statistical patterns, it indicates a tendency for the yen to strengthen more than usual during August.
1.1 Causes of the Anomaly
The causes of the August yen appreciation anomaly are mainly attributed to the following factors:
1.1.1 Impact of “Obon Holiday”
In Japan, many businesses and investors take long vacations in August due to the Obon holiday. This increases the demand to repurchase yen to settle positions, leading to yen appreciation.
1.1.2 Redemption and Interest Payments on U.S. Treasury Bonds
In August, there are often redemptions and interest payments on U.S. Treasury bonds. The dollars received from these payments are often sold to buy yen, contributing to yen appreciation.
1.2 Uncertainty of the Anomaly
However, this anomaly does not occur every year, as the forex market is influenced by various factors, making predictions difficult. Recent data shows a weakening trend in the August yen appreciation anomaly, necessitating careful analysis.
1.3 Countermeasures and Considerations
Therefore, investors and businesses should pay attention to the factors causing the August yen appreciation anomaly and other elements to understand market fluctuations. This can be useful for trading.
2. Timing of the August Yen Appreciation Anomaly
Let’s consider the specific timing of the August yen appreciation anomaly. Notable observations include fewer bullish candles on August 2, 9, and 10, particularly on August 9 for currency pairs like EUR/JPY and GBP/JPY.
From this data, it is evident that the yen appreciation anomaly is likely to occur from the beginning of August to the 10th. However, it should also be noted that the probabilities of bullish candles increase on the 13th and 29th, indicating the presence of a yen depreciation anomaly.
The August yen appreciation anomaly may be influenced by market participants. During mid-August, Japan’s major companies take long vacations, leading to position settlements. Additionally, there are large redemptions of U.S. Treasury bonds in August, increasing the activity of converting foreign currencies into yen.
However, recent reports indicate a weakening trend in the August yen appreciation anomaly. Analysis of 20 years of data shows a decrease in the frequency of yen appreciation for many currency pairs.
Therefore, the August yen appreciation anomaly is not always effective. Since market conditions and factors are constantly changing, caution is required. However, high-interest rate currency pairs like ZAR/JPY and TRY/JPY may still exhibit the yen appreciation anomaly in August, making it necessary to pay attention to these movements.
3. U.S. Presidential Election and Exchange Rates
The U.S. presidential election is a significant event that greatly impacts the global economy. The forex market also fluctuates based on the election results. Generally, the years of the U.S. presidential election and the following year tend to show a tendency towards dollar appreciation and yen depreciation. This is due to market expectations and concerns regarding the policies of presidential candidates.
Specifically, looking at the USD/JPY exchange rate in the years of the U.S. presidential election since 1984, there have been seven instances of dollar appreciation and yen depreciation and three instances of yen appreciation and dollar depreciation. The same trend is observed in the year following the election, with seven instances of dollar appreciation and yen depreciation and three instances of yen appreciation and dollar depreciation.
However, not all presidential elections result in the same movements. Variations can occur depending on the policies of individual candidates and economic conditions, requiring attention. The relationship between the U.S. presidential election and exchange rates is complex, involving various factors such as international economic conditions and market trends.
Nevertheless, predicting exchange rate fluctuations based on election results is extremely difficult. However, it is crucial to be informed about the presidential election when conducting forex trading. Specifically, understanding the policies proposed by presidential candidates and how the market reacts to these expectations and concerns can help manage the risks associated with exchange rate fluctuations.
The following are some factors that influence the relationship between the U.S. presidential election and exchange rates.
3.1 Policies of Presidential Candidates
The economic and monetary policies suggested by presidential candidates significantly impact exchange rates. For instance, a candidate advocating protectionist policies might cause yen appreciation and dollar depreciation.
3.2 Market Expectations and Concerns
Market participants’ expectations and concerns also affect exchange rates. If the market becomes unstable due to election results, yen appreciation and dollar depreciation may occur.
3.3 International Economic Conditions
The impact of the U.S. presidential election on the global economy must also be considered. For instance, changes in U.S. economic policies can have ripple effects on other countries’ economies, potentially affecting exchange rates.
As such, the relationship between the U.S. presidential election and exchange rates is influenced by many factors. While it is difficult to predict, understanding policies and economic conditions can help manage risks.
4. Gotobi and Wednesday Swap
Gotobi and Wednesday swap are anomalies in FX trading that tend to occur on specific days or times. The following details each anomaly.
Gotobi
Gotobi refers to the days when Japanese import companies make dollar settlements, typically on days ending in 5 or 0. During these days, it is important to watch the movements in Tokyo trading hours. Although there is no specific statistical basis, an appreciation of the dollar against the yen is expected on Gotobi days.
Wednesday Swap
Wednesday swap is a specific phenomenon that occurs every Wednesday, where holding positions can earn swap points. Since no swap points are given over the weekend, many traders tend to sell low-interest yen and buy high-interest currencies on Wednesdays, leading to yen depreciation.
Additionally, more swap points may be received on Wednesdays than usual. By holding positions in currency pairs and directions that turn positive in swap from Wednesday midnight to Thursday morning, profits can be targeted.
To utilize Wednesday swap, it is necessary to sell low-interest currencies and buy high-interest currencies. Typically, this means selling the yen. USD/JPY is a commonly chosen currency pair.
However, Gotobi and Wednesday swap anomalies do not always occur. As there is no statistical basis, other factors and backgrounds must also be considered.
The above explains Gotobi and Wednesday swap. Next, we will introduce other famous anomalies.
5. Other Famous Anomalies
Various anomalies exist, but there are other well-known anomalies worth noting. Below are some representative anomalies.
5.1 Gotobi (5th and 10th)
Gotobi is a day that Japanese import companies or companies needing dollar settlements particularly focus on. This anomaly tends to occur on dates ending in 5 and 10. Financial institutions buy dollars in the forex market to resolve dollar shortages, often leading to an upward trend in the USD/JPY rate.
5.2 Wednesday Swap
Wednesday swap is a strategy to profit from currency interest rates. Since interest for the weekend is added on Wednesday, traders tend to sell low-interest currencies and buy high-interest currencies on Wednesdays.
5.3 Anomalies Based on Astrology
There are also anomalies based on astrology. Common examples include “Mercury retrograde,” which tends to cause market instability, and “new moon/full moon,” which often sees market fluctuations. Additionally, there is an anomaly where the forex market becomes active the year after the U.S. presidential election.
5.4 Ghibli Curse
In Japan, there is also an anomaly known as the “Ghibli Curse.” It is observed that on the first Friday when U.S. employment statistics are announced, if a Ghibli movie is aired, the market tends to crash. It is uncertain whether this phenomenon is coincidental or not, but it has garnered attention.
These anomalies show specific tendencies related to market movements or particular days. However, there are cases where the reasons or grounds for anomalies are not clear. Therefore, trading solely based on anomalies entails risks. It is essential to consider other information and indicators when utilizing anomalies.
Conclusion
While various anomalies exist in the forex market, they do not always occur with certainty. Instead, analyzing more comprehensive factors such as market trends and macroeconomic indicators is crucial. Avoid being misled by transient anomalies and maintain a long-term perspective and flexible adaptability for success in forex trading. Understanding the complex structures behind forex fluctuations and conducting risk management according to the situation can lead to more effective investment decisions.
FAQs
Why does the August Yen Appreciation Anomaly occur?
The main reason for the August yen appreciation anomaly is the demand to repurchase yen by businesses and investors to settle positions due to the Obon holiday in Japan. Additionally, there are redemptions and interest payments on U.S. Treasury bonds in August, where the received dollars are sold to buy yen, contributing to the anomaly. However, it does not occur every year and has been weakening in recent years.
What impact does the U.S. presidential election have on exchange rates?
The impact of the U.S. presidential election on exchange rates varies depending on the policies of the candidates, market expectations and concerns, and international economic conditions. Past data shows a tendency towards dollar appreciation and yen depreciation during the election year and the following year, but it does not always follow this pattern. It is essential to consider these factors comprehensively when conducting forex trading.
What are Gotobi and Wednesday swap?
Gotobi refers to days when Japanese import companies make dollar settlements, typically on days ending in 5 or 0, leading to an expected appreciation of the dollar against the yen. Wednesday swap is a phenomenon where traders sell low-interest yen and buy high-interest currencies on Wednesdays to earn swap points. However, these anomalies do not always occur.
What are some other famous anomalies?
Other famous anomalies include astrology-based anomalies (e.g., Mercury retrograde, new moon/full moon) and the “Ghibli Curse,” where the market tends to crash when a Ghibli movie airs on the first Friday of U.S. employment statistics announcement. Many of these anomalies lack clear grounds, so it is essential to consider other information when trading.
