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13/03/2014: Analysis of daily pip ranges for GBP/USD and USD/JPY


March has been a tough grind for Forex traders, with a lower than average daily pip range on Cable and Dollar/Yen

Last week I did analysis on the daily pip range on Euro/Dollar. The results showed the consistent decline over the past 5 years, to currently average well below 100 pips per day, with the year-to-date average daily pip range for Euro/Dollar at just 76 pips per day.

GBP/USD

Analysis of Sterling/Dollar shows a similar trend of decline over the past few years, but for a higher base:

  • 224 pips in 2009  (Euro/Dollar was 170 pips)
  • 162 pips in 2010  (152 pips)
  • 141 pips in 2011  (159 pips)
  • 98 pips in 2012    (108 pips)
  • 112 pips in 2013  (98 pips)

For the current year to date, the average pip range on Sterling/Dollar is now 100 pips (Euro/Dollar averages just 76)

The data for the months of February and March in each of those years shows a similarly consistent decline:

            Average GBP/USD pip range low to high
Year February March
2009 290  (Euro/Dollar 207) 255  (Euro/Dollar 218)
2010 159  (145) 178  (145)
2011 134  (133) 134  (127)
2012 110  (125) 113  (112)
2013 125  (124) 112  (111)
2014 99  (73) 86*  (68*)

* After 8 trading days in the month

The table shows that Cable has followed a similar trend of declining pip ranges that it has for Euro/Dollar.

However, you would also say that over the years of 2011, 2012 and 2013, the relative pip ranges between the two currency pairs has been remarkably similar. However, 2014 seems to be a different story. While Cable has held up well in the year to date, averaging 100 pips per day, Euro/Dollar has fallen away significantly to 76 pips.

Both rates are not being helped by disappointing month-to-date averages for March

This suggests that the way things have started in 2014, Euro/Dollar continues to become less volatile from the perspective of its average daily trading range.

USD/JPY

The analysis of the pip range for Dollar/Yen could be telling us as much about how Abenomics continues to impact on the forex market, as it tells us about the trend of pip ranges:

  • 126 pips in 2009
  • 91 pips in 2010
  • 71 pips in 2011
  • 58 pips in 2012
  • 109 pips in 2013

For the current year to date, the average pip range on Dollar/Yen is now 83 pips.

This suggests that until Abenomics was introduced to forex investors after the Japan General Election of December 2012, the average daily range doubled in 2013. The year-to-date average range of suggest that the market is still trading with the legacy of Abenomics.

The data for the months of February and March in each of the past 6 years shows the improving impact that Abenomics has had:

   Average USD/JPY pip range low to high
Year February March
2009 157 181
2010 97 86
2011 64 111
2012 64 82
2013 130 103
2014 81 69*

* After 8 trading days in the month

The table shows that he trend for Dollar/Yen in February has tended to be that February is a month that is broadly in line or slightly above the average for the year.  It also suggests that March has often been a month where the pair has had larger than average daily trading ranges.

However, the current March is currently significantly below the average for the year. Either investors are being abnormally apprehensive, or that we could be set for more volatility in the daily ranges as the month progresses.


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