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 was a mixed picture, with the EUR and JPY rising, and the GBP and CHF falling, against the USD. This is not untypical for the summer months of June and July. I expect this mixed scenario will continue next week.
Summary
This week, the quantitative and technical forecasts disagree, with the exception of USD/CHF which both see as likely to rise in value.
Next week, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 32 weeks.
Last week, the quantitative and technical forecasts were identical. The results were as follows:
The running totals of the forecasts after 32 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 performed positively, but the quantitative forecast has performed a little better.