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GBP/USD statistical and technical analysis

The current price of the GBP/USD exchange rate is 1.3950 (June 22, 2021). This pair bounced back from an important short-term level (1.3800) yesterday. Therefore, we will look now 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% , which is between the first and second standard deviation. Our scoring is currently negative (-2 ) for the month-on-month change and 0 for price indexation. This means that the periodic change is negative, and the indexation is in an extreme 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.

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. According to the monthly MA, GBP/USD is in bearish sentiment, after falling below it last week. As we can see in the chart below, the 6 months and annual MAs are still in bullish sentiment. In the event of a decline, the 6-month MA can be an important support for the exchange rate.

GBP/USD daily price development Source: WALFIR

There have been more downward trends since our last analysis. In the recent week month, a maximum of 5 consecutive days was reached. This is even more than during the outbreak of COVID-19 . However, upward trends in the same period did not exceed more than 2 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 (0.85% ). The current value is 0.93% , which normal. Approximately 90% confidence interval (return between -1% and 1% ) 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 daily low to high distribution Source: WALFIR

Basic technical analysis still supports bullish sentiment, as the exchange rate creates higher highs and higher lows. 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. The divergence between price development and the RSI could also motivate short-term bulls. However, the short-term MA together with the psychological level of 1.4000 may represent resistance to the exchange rate.

GBP/USD basic 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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