From Technical Analysis to Wavelet Analysis in Performance of Australian Dollar
Technical analysis have been employed in identifying trend changes of the exchange rates at an early stage and to determine whether to maintain an investment or trading posture until the weight of the evidence shows that the trend has reversed. Recently, waveform dictionaries have been accepted as new data analysis tools for non-stationary data and thus applied in the financial market (Ramsey 1997). The waveform dictionaries are a new data analysis technique which is comprised of both windowed Fourier transform and wavelet transform (Daubechies 1992). Each waveform is parameterized by location, frequency and scale. The waveform dictionaries can analyze signals that have highly localized structures in either time or frequency space, as well as broadband structures. Waveforms can, in principle, detect everything from shocks represented by Dirac Delta functions, to short bursts of energy within a narrow band of frequencies that occur sporadically, and finally to the presence of frequencies that hold over the entire observed period. In this paper, waveform dictionaries are used to analyze the trend of exchange rates of four currencies: the U.S. dollar, the Japanese yen, the British pound and the Euro dollar with the Australian dollar.
Keywords: Waveform Dictionaries, Time-Frequency Map
Lecturer, School of Accounting & Finance, Victoria University