Quantitative Forecast
Academic studies have shown that the most reliable way to determine 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, technical analysis forecast for the edge during the coming week is as follows:
All of the major pairs printed reversal engulfing weekly candles against the trend, suggesting technically that the trend will now reverse or at least pull back.
Therefore it seems that each pair will probably continue to move against the trend net week, with the exception of USD/JPY which is only showing its first sign of hesitation.
Summary
The quantitative and technical forecasts do not agree, with the exception of USD/JPY.
Next week, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 1 week.
Both the technical and quantitative forecasts were wrong last week.
Their running totals so far are as follows:
