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EUR/USD statistical and technical analysis

The current price of the EUR/USD exchange rate is 1.1862 (August 03, 2021). The currency pair rebounded from an important support zone last week. Let us therefore look at statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.44% and -0.44% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.22% and -0.22% . YesterdayΒ΄s return was 0.03% , well below the first standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and 3 for price indexation. This means that we are still in the positive phase of the cycle. However, we could be close to the peak of this short-term cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical systems is shown in the following chart.

EUR/USD daily price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. According to the monthly MA, EUR/USD is in bullish sentiment, after rising above it last week. As we can see in the chart below, the 6 months and annual MAs are still in bearish sentiment. In case of further growth, the annual MA can be an important support for the exchange rate.

EUR/USD daily price development Source: WALFIR

Since our last analysis, there have been more declining trends, with a maximum of 3 consecutive days. However, the upward trend dominated last week, but did not exceed more than 4 days. The maximum in the measured period is 5 days in a declining trend and 7 days in an uptrend. We could use the average long-term ATR (Average True Range) obtained from daily data (0.62% ) to estimate Stop Loss orders for our positions. The current value is 0.30% . Approximately 90% confidence interval (return between -1.0% and 1.0% ) is shown in the histogram below by a red rectangle.

EUR/USD daily return distribution Source: WALFIR

We could use the last decile of low to high returns (1.50% ) to estimate Profit Targets, as shown in the chart below.

EUR/USD daily low to high distribution Source: WALFIR

Basic technical analysis supports short-term bearish sentiment after the June’s dynamic decline. However, this pair has recently rebounded from an important demand zone (green rectangle), where there is also the Fibonacci retracement level of 23.60% at the bottom. We can see the bullish divergence between the market price and the RSI, which was created last month. EUR/USD is currently trading sideways as there has been a longer-term bearish divergence. In the event of a further growth, the psychological level of 1.2000 and long-term MA could represent an important resistance to the exchange rate.

EUR/USD basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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