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This paper provides evidence that currency spot prices are autocorrelated, which indicates that technical analysis in foreign exchange trading can and should take a leading role for analyzing expected exchange rate movements. The Augmented Dickey-Fuller test was used to test the Random Walk Hypothesis on the USD/CHF exchange rate prices in a one minute frequency timeline for 10 randomly selected Fridays. Under the Extreme Values Method, calculations were based on the High-Low ask price spread and not on the volatility of closing prices. The main contribution of this paper is that new evidence is generated providing reasonable basis to discard the Efficient Markets Hypothesis in its weak form. The findings lead to embracing the Dow Theory, rather than the Random Walk approach, and conclude that markets are not efficient in their weak form. |
