Quantitative Forecast
Academic studies have shown that the most reliable way to determine the future price movements from past price movements is by use of momentum. In the Forex market a momentum study is best applied to the four major Forex currency pairs by simply checking whether the weekly close is above or below the weekly close 13 weeks ago.
If the price is higher, the statistical edge is in trading that pair long.
If the price is lower, the statistical edge is in trading that pair short.
On this basis, the quantitative momentum forecast for the edge during the coming week is as follows:
Technical Forecast
The question as to whether an experienced chart-reading technical analyst can outperform a simple momentum model warrants a live experiment. Looking at the weekly charts for each of the four major pairs, I will try to determine the line of least resistance, and forecast the directional edge using my own technical analysis.
On this basis, my technical analysis forecast for the edge during the coming week is as follows:
Last week saw a stronger than expected move in favour of the USD, although the GBP was a little stronger. The moves against the EUR and CHF were especially strong, which produced a moderately negative overall result for both of the forecasts, which were identical.
Summary
This week, the quantitative and technical forecasts are identical. They see the USD rising across the board next week, with the exception of the GBP which is expected to be the strongest of all.
Next week, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 31 weeks.
Last week, the quantitative and technical forecasts were different regarding all the currencies except the JPY. The quantitative forecast performed just a little better this week. The results were as follows:
The running totals of the forecasts after 31 weeks so far are as follows:
