1. A system for encoding a two dimensional (2D) signal, comprising: a general purpose computing device; a computer program comprising program modules executable by the general purpose computing device, wherein the computing device is directed by the program modules of the computer program to, input a two dimensional (2D) signal; transform said 2D signal using directional prediction based on spatial correlations of edges in an image, wherein the spatial correlations are based on directional angles, selectable from 0 to 360 degrees based on blocks of pixels in the image, and at least one lifting wavelet to obtain output coefficients representing the two dimensional signal, directional angles based on the edges in the image, and modes representing sizes of image blocks, wherein the directional angles are estimated by: partitioning an image block into three sets of progressively smaller blocks of block modes, wherein a first block mode is a large block of pixels, a second block mode is smaller than the first block of pixels and a third block mode is a sub-set of the second block of pixels, and wherein in the first block mode all pixels have the same directional angle; and wherein the third block mode each block has 16 directional angles and all pixels in the third block mode share the same angles; estimating the directional angle for a wavelet transform in the vertical direction by ∑ m = m 0 m 0 + 16 ⁢ ∑ n = n 0 n 0 + 8 ⁢  h ⁡ ( m , n )  + λ v ⁢ R v where h(m,n) are high-pass coefficients after the wavelet transform in the vertical direction; R v are the number of bits to code the block mode and directional angle; λ v is an optimization factor and (m 0 ,n 0 ) are the coordinates of the left-upper pixel of h(m,n), and estimating the directional angle for a wavelet transform in the horizontal direction by ∑ m = m 1 m 1 + 8 ⁢ ∑ n = n 1 n 1 + 8 ⁢  lh ⁡ ( m , n )  + λ h ⁢ R h where lh(m,n) are the coefficients of a low high sub-band; R h are the number of bits to code the mode and directional angles; λ h is an optimization factor and (m 1 ,n 1 ) are the coordinates of the left-upper pixel of lh(m,n); and entropy encode the output coefficients, directional angles and modes thereby generating an encoded version of the input signal.