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 moves against the USD except in the case of the JPY. I see next week’s market as likely to be driven by the other currencies and not the USD, so half of my forecast differs from the quantitative forecast.
Summary
I believe that the USD will strengthen against the GBP and CHF, but weaken everywhere else, over the coming week.
Next week, we will review how these forecasts performed.
Previous Forecasts
These forecasts have been running for 40 weeks.
In my last forecast on 4th October, the results were as follows:
The running totals of the forecasts after 40 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.