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 only -0.01% , which is well below the first standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and -2 for price indexation. This means that the periodic change is in the neutral stage and the indexation is in the 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.
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 annual MA, GBP/USD is still in bullish sentiment. The monthly MA is currently supporting exchange rate.
There have been more downward trends since our last analysis, when a maximum of 3 consecutive days was reached. However, upward trends in the same period also did not exceed 3 days. The maximum in the measured period is 8 days in the downtrend and 9 days in the uptrend. To estimate Stop Loss orders for our positions, we could use the average long-term ATR (Average True Range) obtained from daily data (0.81% ). The current value is 0.29% , which is below average. 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.
The basic technical analysis supports short-term bullish sentiment, as the exchange rate rebounds again from an important support level at 1.3800 . In addition, GBP/USD has also recently been close to the demand zone (green rectangle) with a strong bottom, where are the Fibonacci retracement level of 23.60% and the long-term moving average. However, the divergence between price development and the RSI currently motivates short-term bears. The short-term MA can also represent resistance to the exchange rate.