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 huge, wild moves in the market, with the USD initially weakening strongly and the EUR strengthening hugely, before the moves reversed sharply and the USD ended the week up everywhere except against the Japanese Yen, against which it was very slightly down. Both forecasts performed poorly, especially my technical forecast. It is hard to get it right a whole week in advance when very wild markets occur.
Summary
This week, the quantitative and technical forecasts agree only on the USD/CHF pair. I believe that the USD will strengthen across the board over the coming week.
Towards the end of September, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 37 weeks.
Last week, the quantitative and technical forecasts were identical. The results were as follows:
The running totals of the forecasts after 37 weeks so far are as follows:
Both forecasts have performed negatively to date, due mainly to the very sharp and historically unprecedented counter-trend moves in the CHF over recent months.