Portfolio Performance : +25.73%

US Dollar Barometer stands at -3

Trade Recommendation : Long EUR/USD

Bottomline : Tough market for equities. The media is focusing on Lehman over the weekend, shorts are looking at Merrill and AIG next. Commodities might rebound, I think it is good to put some short term tactical long positions in Gold. US dollar strength has weakened!

In A comparison of the accuracy of short term foreign exchange forecasting methods, Nigel Meade, 2002

The author made an attempt to examine the short term forecasts methods from linear and non-linear processes. In his tests, the measurement of point accuracy was achieved using a range of summary statistics coupled with tests of significance. The significance of directional accuracy was measured using Peseran and Timmerman's test and the associated theoretical profit assessed by simple trading rules.

Here are the results of the error measures. The MAE showed showed some evidence of greater accuracy for three series (2 hourly and 1 hourly). RMSE and Peseran and Timmerman test showed accuracy increasing with the frequency of observation. RMSE showed significantly greater accuracy than the no-change forecast for two-hourly, one-hourly and half-hourly data: in addition this greater accuracy persisted for multi-period horizons. The Peseran and Timmerman test showed significant predictive performance for four-hourly and more frequent data. This predictive performance persisted for multi-period horizons, at least ten periods for most half-hourly data sets for most methods. The application of the trading rule confirmed the existence of potentially profitable trading opportunities.