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Transforms used in image coding are also commonly used to compress prediction residuals in video coding. Prediction residuals have different spatial characteristics from images, and it is useful to develop transforms that are adapted to prediction residuals. In this paper, we explore the differences between the characteristics of images and motion compensated prediction residuals by analyzing their local anisotropic characteristics and develop transforms adapted to the local anisotropic characteristics of these residuals. The analysis indicates that many regions of motion compensated prediction residuals have 1-D anisotropic characteristics and we propose to use 1-D directional transforms for these regions. We present experimental results with one example set of such transforms within the H.264/AVC codec and the results indicate that the proposed transforms can improve the compression efficiency of motion compensated prediction residuals over conventional transforms.