Because of the overlap between
North American and European trading sessions, the trading volumes are much more
significant. Some of the biggest and most meaningful directional price movements
take place during this crossover period. On its own, however, the North
American trading session accounts for roughly the same share of global trading
volume as the Asia Pacific market, or about 22 % of global daily trading
volume.
The North American morning is
when key U.S. economic data is released and the forex market makes many of its
most significant decisions on the value of the U.S. dollar. Most U.S. data
reports are released at 8:30 a.m. ET, with others coming out later (between 9
and 10 am ET). Canadian data reports are also released in the morning, usually
between 7 and 9 a.m. ET. There are also a few U.S. economic reports that
variously come out at noon or 2 p.m. ET, livening up the New York afternoon
market.
London and the European financial
centers begin to wind down their daily trading operations around noon eastern
time (ET) each day. The London, or European close, as it’s known, can
frequently generate volatile flurries of activity. A directional move that
occurred earlier in European trading or the New York session may be reversed if
enough traders decide to take profit
(selling out or exiting long positions) or
cover shorts (buying back short positions). Or the directional move may
extend farther, as traders betting against the earlier directional move
withdraw their interest and decide to go with the primary move. There's no set
recipe for how the European close plays out, but significant flurries of
activity frequently occur around this time.
On most days, market liquidity
and interest fall off significantly in the New York afternoon, which can make
for challenging trading conditions. On quiet days, the generally lower market
interest typically leads to stagnating price action. On more active days, where
prices may have moved more significantly, the lower liquidity can spark
additional outsized price movements, as fewer traders scramble to get similarly
fewer prices and liquidity. Just as with the London close, there’s never a set
way in which a New York afternoon market move will play out, so traders just
need to be aware that lower liquidity conditions tend to prevail and adapt
accordingly.
Lower liquidity and the potential
for increased volatility is most evident in the least-liquid major-currency
pairs, especially USD/CHF and GBP/USD.
North American trading interest
and volume generally continue to wind down as the trading day moves toward the
5 p.m. New York close, which also sees the change in value dates take place.
But during the late New York afternoon, Wellington and Sydney have reopened and
a new trading day has begun.
