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 strengthen. The quantitative analysis is now showing the USD as stronger than all of its major paired currencies. This is a potentially significant development.
Summary
Both the quantitative and technical forecasts see the USD as continuing to strengthen against all its major pairs.
Next week, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 17 weeks.
Last week, the technical and quantitative forecasts both produced positive results overall, although both were wrong about the USD/CHF pair. The USD strengthened across the board. The results were as follows:
The running totals of the forecasts after 17 weeks so far are as follows:
