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Lunar New Year and the quiet that isn't empty

Chinese New Year shuts much of Asia for several days. Onshore markets close, and trading in the yuan, the Australian dollar, and regional currencies thins out.

A common belief is that nothing happens. In reality, the market stays open elsewhere, and the thin liquidity can produce odd behavior. Prices drift and then jump when a news headline hits a reduced book.

AUDUSD and NZDUSD, which are heavily influenced by Chinese demand and flows, often trade in narrower ranges but with wider spreads. Stops are more likely to be run by random flows.

Around the holiday, positioning by funds can also matter. Some close positions ahead of the break and reopen them after, creating small flows at the edges of the closure.

The most useful change in approach is probably expecting a different distribution of outcomes: fewer moves, but fatter tails.

Taking the week off is a legitimate choice. So is trading smaller, with wider stops, and accepting that signals are less reliable.

Do the tick-rate and range figures on AUDUSD drop visibly during Lunar New Year?

I pulled my AUDUSD tick logs for the last two holiday weeks after reading this, and yes, the drop is obvious. During the main days of the break my one-minute tick count during the Asian session fell to roughly half of a normal week, and the average five-minute range shrank by a similar amount. What didn't shrink was the size of the occasional jump, which is exactly the fat tails point.

The worst moment I had was a quiet afternoon in Sydney hours where price sat in a six-pip box for nearly an hour, then one order swept through my stop and reversed inside two minutes. Spread had quietly gone from under one pip to almost three while I wasn't watching.

These days I simply don't trade the Aussie or Kiwi during the core holiday days. I keep EURUSD in London hours as normal, since that session barely notices, and I treat the week as a good time to review the journal instead of forcing trades.

Chinese markets close for the Lunar New Year and Golden Week, and Japan has its own Golden Week at the start of May. For a few days, a large block of regional liquidity vanishes.

The effect on the major pairs is easy to miss. EURUSD barely notices. For USDJPY, AUDUSD, NZDUSD, and especially offshore yuan pairs, the thinning is clear. Spreads are wider, depth is thinner, and moves can be erratic.

There's a specific risk in Japan's case. In early January 2019, with Japan still on its New Year break, the yen spiked violently in extremely thin conditions during the first minutes of Asian trading. Positions that looked safe were stopped out at awful prices, and holiday-thinned sessions can repeat that pattern.

Anything that relies on typical Asian-session behavior should be reviewed before these holidays. Volatility filters calibrated on normal weeks can misjudge the risk.

A holiday calendar for the region, set up once a year, avoids most of the surprises.

Calendars for these holidays shift year to year, since the Lunar New Year follows the lunar calendar. A scalper trading regional pairs benefits from a yearly reminder set in advance. The period just before the holiday often shows heavy positioning adjustment, so volatility can spike in the days leading up to it rather than during it.

Which regional holiday produced the strangest move on a pair that normally behaves?