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, my technical analysis forecast for the edge during the coming week is as follows:
Last week saw the USD continue to weaken, although it did recover somewhat at the end of the weak. For the first time in a long while, the quantitative analysis shows the USD as weaker than both the JPY and CHF. These are potentially significant developments.
Summary
The quantitative and forecast sees the USD as strengthening against the Euro and the British Pound, but weakening against the Japanese Yen and Swiss Franc.
The technical forecast is slightly different, seeing the U.S. Dollar as likely to rise against the Swiss Franc this week, due to a strongly supportive zone below the current price..
Next week, we will review how these forecasts performed.
[CAD:FXAcademy CTA #121]Previous Forecasts
These forecasts have been running for 15 weeks.
Last week, the technical and quantitative forecasts both produced mixed results The USD actually weakened across the board with the exception of the British Pound. These results were as follows:
The running totals of the forecasts after 15 weeks so far are as follows:
Both forecasts have performed negatively to date, due solely to the very sharp and historically unprecedented counter-trend moves in the CHF over recent months. Excluding the USD/CHF pair, both have been performing positively, but the Quantitative forecast has performed significantly better.