Analysis of Market Trend Regimes for March 2011 USDJPY Exchange Rate Tick Data

This paper reports the analysis of the foreign exchange market for the USD and JPY currency pair in March 2011 for the period of 23 trading days comprising 3,774,982 transactions. On March 11, 2011 the disaster of the Great Tohoku Earthquake disaster accompanied by tsunami took place; the event was followed by a highly turbulent market with JPY appreciating without limits in the panic that ensued; major central banks of the world intervened since after to weaken the yen. We analyze the tick data set using the criteria of aggregate volatility, extreme-event distribution, and singular spectrum analysis to discover the market microstructure during the central bank interventions. In addition, a multi-layer neural network algorithm is designed to extract the causality regime on the microscale for each trading day. At the beginning of the month, the success ratios in the trend prediction hit levels as high as the order of 70 %, followed by about a 10-point decrease for the rest of the data set. Distribution of intra-trade times shows clear signs of algorithmic trading with the transaction clock ticking at the time intervals of 0.1, 0.25 and 10.0 s. The extracted trend prediction rates represent lower bounds with respect to other methods. The present work offers a useful insight into algorithmic trading and market microstructure during extreme events.

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