# Seasonal Trends of the Canadian Dollar

04 February 2022 243 3

Hypothesis

The Canadian dollar has a well-pronounced seasonality in various weeks of the year.

To determine seasonality, we will use the following criteria:

1. The share of cases of unidirectional increments of daily deltas within one week for a period of at least 10 years must be higher than 53%.
2. The ratio between the average value of positive daily increments and the average value of negative daily increments must comply with the direction of week-long price increments. So, this condition is met if this value is more than 1.
3. The linear trend of the distribution of values of week-long deltas must have the direction towards growth of unidirectional increments.

If only all the three listed conditions are met, we can talk about seasonality of quotes of the Canadian dollar.

Data used

Historical data of quotes of the USDCAD currency pair.

The timeframe is 1D.

The history covers the period since January 1982 until May 2019.

The sample is 9 750 values.

For a clear vision of the detection of seasonal trends, we will introduce the consistence of our actions in the following diagrams.

Step 1. We will estimate the share of cases when quotes mostly rise or fall. Green weeks are a rise. Red weeks are a fall.

17 weeks of the year meet the 1st criterion: 3, 10, 13, 15, 16, 17, 19, 21, 25, 26, 31, 34, 39, 45, 46, 49, 50.

Step 2. We calculate the ratio between average positive and average negative changes of quotes from the number of weeks obtained in the first step.

As the result of the 2nd step, the following 6 weeks were filtered out: 10, 17, 19, 21, 26, 45.

11 weeks of the year (3, 13, 15, 16, 25, 31, 34, 39, 46, 49, 50) meet two of three criteria of seasonality. While weeks 3, 25, 31, 39, 46, 49, 50 are characterized by growth of quotes and weeks 13, 15, 16, 34 are characterized by a decline.

Now we test these weeks against the 3rd criterion of a linear trend of the distribution of week-long changes of quotes for the last 10 years.

Step 3. According to the filtration based on the last condition of the selection, we obtain the following final picture of weeks with a well-pronounced seasonality.

5 weeks meet all the three conditions: 15, 31, 46, 49, 50.

Conclusion

So, we have confirmed that there are manifestations of seasonality of quotes of the Canadian dollar.

The rate of the USDCAD currency pair is characterized by growth during the 31st, 46th, 49th, 50th weeks of the year and experience a decline during the 15th week.

The influence of seasonality on the Canadian dollar has been identified.

Detailed results are shown in the appendix: