Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.43% and -0.43% , respectively. Yesterday´s return was -0.15% . Our scoring is currently neutral (0) for the month-on-month change and -2 for price indexation. . Both scorings range from -3 up to 3 . An indexation bottom below -0.8 could be an opportunity for bulls. 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. GBP/USD is in bearish sentiment in the case of monthly MA, after falling below it. As we can see in the chart below, the 6 months and annual MAs are still in bullish sentiment..
Since September 2020, there have been upward trends that have not exceeded more than 4 consecutive days. Downward trends did not exceed more than 2 days in the same period. We could use the average long-term ATR (Average True Range) obtained from daily data (0.85% ) to estimate Stop Loss orders for our positions. The current value is 0.71% . Approximately 90% confidence interval (return between -1% and 1% ) 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 second chart below.
Basic technical analysis still supports bullish sentiment, as the exchange rate creates higher lows and higher high. However, EUR/USD is currently also close to the demand zone (green rectangle) with a strong bottom, where the Fibonacci retracement level of 38.20% is. In addition, the shorter-term MA has also recently been very close to the exchange rate. Volumes are slowing down. The divergence between price development and RSI could also motivate short-term bulls and bring the upward rebound to a psychological level of 1.4000 or even higher to 1.4200.