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GBP/USD statistical and technical analysis

The current price of the GBP/USD exchange rate is 1.3885 (May 04, 2021). This pair bounced back from an important short-term level (1.3800) yesterday. Therefore, we will look at statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.43% and -0.43% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.21% and 0.21% . YesterdayΒ΄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.

GBP/USD 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. 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.

GBP/USD daily development Source: WALFIR

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.

GBP/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.

GBP/USD low to high distribution Source: WALFIR

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 .

GBP/USD 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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