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% . Yesterday´s return was -0.05% , well below the first standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and 0 for price indexation. This means that we are in the middle of a declining phase of the 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.
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 all MAs, EUR/USD is in bearish sentiment because it is below them. In the event of a rebound, the monthly MA may be exchange rate resistance.
Source: WALFIR
Since our last analysis, there have been more declining trends, with a maximum of 5 consecutive days. This level has been tested several times in the last 3 years. Uptrends did not exceed more than 5 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 (0.58% ) to estimate Stop Loss orders for our positions. The current value is 0.32% , which is half the average. Approximately 90% confidence interval (return between -1.0% and 1.0% ) is shown in the histogram below by a red rectangle.
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.
Source: WALFIR
The basic technical analysis supports short-term bearish sentiment after falling into an important zone of demand (green rectangle), where are also the Fibonacci retracement level of 38.20% and the psychological level of 1.1600 . We can see a bullish divergence between the market price and the RSI, which has been developing since June. EUR/USD is currently testing lows of the last month and March.
Source: TradingView
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