Why Would Technical Analysis to Forecast Future Exchange Rates Be

question 32

Multiple Choice

Why would technical analysis to forecast future exchange rates be ineffective if all parity conditions prevailed?

• A) The best predictor of future rates would be the current spot rates.
• B) The only predictor would be the volatility of future exchange rates.
• C) The best predictor of future rates would be the forward rate.
• D) The unbiased predictor would not exist due to market trends.

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Definitions:

GDP Price Index

A comprehensive inflation measure of all goods and services included in the gross domestic product.

Final Goods

Products that are completed and ready for sale and consumption, as opposed to intermediate goods used in the production of another product.

Consumer Price Index

An index measuring the change in the price level of a basket of consumer goods and services purchased by households.

Market Basket

A selected set of goods and services used to track changes in prices and measure inflation over time.