Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.43% and -0.43% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.21% and 0.21% . Yesterday´s return was 0.61% . Our scoring is currently negative (0 ) for the month-on-month change and -2 for price indexation. This means that the periodic change is close to its average and indexation in the decreasing phase of the cycle. Both scorings range from -3 up to 3 . The estimated cycles development based on our analytical systems is shown in the following chart.
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. In the case of monthly MA, GBP/USD is in bullish sentiment again, after getting above it. Therefore, as we can see in the chart below, all MAs still support bullish sentiment.
Since the beginning of this year, there have been more upward trends even after considering stabilization of the exchange rate. In the last month, a maximum of 5 consecutive days was reached. However, the downward trends in the same period did not exceed more than 4 days. We could use the average long-term ATR (Average True Range) obtained from daily data (0.91% ) to estimate Stop Loss orders for our positions. The current value is 0.76% . Approximately 90% confidence interval (return between -1.0% and 1.0% ) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (1.50% ) to estimate Profit Targets, as shown in the chart below.
Basic technical analysis still supports bullish sentiment, as the exchange rate creates higher lows and higher high. However, GBP/USD is also currently close to the demand zone (green rectangle) with a strong bottom, where the Fibonacci retracement level of 23.60% is. There is also a bullish pattern of double bottom. In addition, the shorter-term MA has also recently been very close to and supportive of the exchange rate. However, the divergence between price development and RSI could motivate short-term bears after falling below the MA and the short-term psychological level of 1.3800 .