EUR/USD Forecast: Prophet vs JPM

Photo by Immo Wegmann on Unsplash

• According to the JPM analysis of currency volatility, EUR/USD is predicted to hold at 1.08 in December 2023.

• For comparison, ING’s adjusted EUR/USD forecasts projecting the pair to trade at:

• $1.00 by Q2, Q3 and Q4 2023.
• $1.02 in Q1 2024
• $1.10 by Q4 2024.

• Let’s invoke FB Prophet (FBP) to check these forecasts.

Input Data

Let’s set the working directory

import os
os.chdir(‘YOURPATH’)
os. getcwd()

and read the input data

import pandas_datareader.data as web
import datetime
import pandas as pd
pd.set_option(‘display.max_columns’, None)
pd.set_option(‘display.max_rows’, None)

from pandas_datareader import data as pdr
import yfinance as yfin

yfin.pdr_override()

yfin.pdr_override()

start_date = “2003-01-1”
end_date = “2023-07-19”

btc = pdr.get_data_yahoo(“EURUSD=X”, start_date, end_date)[‘Close’]

print(btc.tail())

[*********************100%***********************] 1 of 1 completed Date 2023-07-13 1.114455

2023-07-14 1.122347

2023-07-17 1.122776

2023-07-18 1.123760

2023-07-19 1.122889

Name: Close, dtype: float64

Let’s convert Series btc to Dataframe df, apply reset_index and rename the 2 columns

df = btc.to_frame().reset_index()
df = df.rename({‘Date’: ‘ds’, ‘Close’: ‘y’}, axis=’columns’)

FBP Forecast

Let’s define the FBP model and perform fitting with daily_seasonality=True

mx = Prophet(daily_seasonality=True)
mx.fit(df)

Let’s perform the 1Y FBP forecast with periods=365

future = mx.make_future_dataframe(periods=365)

forecast = mx.predict(future)

and plot the results

pd.options.display.max_columns = None
figure1 = mx.plot(forecast)
figure2 = mx.plot_components(forecast)

Conclusions

• We have seen how we can design a 1Y EUR/USD prediction model using FB Prophet with only a few lines of Python code.
• Our results show that EUR/USD is predicted to hold at 1.08+/-0.07 in December 2023. This is consistent with the JPM‘s forecasts.
• As for EUR/USD trends in the second half of 2023, JPM is neutral on the euro, whereas our prediction is bearish on the euro in the same period of time.

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