publication . Report . Preprint . 2008

The Dynamic Interaction of Order Flows and the CAD/USD Exchange Rate

Nikola Gradojevic; Christopher J. Neely;
Open Access
  • Published: 01 Jan 2008
  • Publisher: Federal Reserve Bank of St. Louis
Abstract
We explore the relationship between disaggregated order flow, the Canada/U.S. dollar (CAD/USD) market and U.S. macroeconomic announcements. Three types of CAD order flow and the CAD/USD are cointegrated. Financial order flow appears to contemporaneously drive the CAD/USD while commercial order flow seems to contemporaneously respond to exchange rate movements. Past order flow and lagged exchange rates strongly explain most types of order flow. Despite this predictability and the contemporaneous correlation of order flow with exchange rate returns, exchange rate returns are not predictable by either statistical or economic criteria (trading rule). This negative f...
Subjects
free text keywords: Foreign exchange rates
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publication . Report . Preprint . 2008

The Dynamic Interaction of Order Flows and the CAD/USD Exchange Rate

Nikola Gradojevic; Christopher J. Neely;