Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.42% 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 -0.40% , which is still 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.
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 all MAs, GBP/USD is currently in a bearish sentiment after the exchange rate has fallen below the monthly moving average.
Source: WALFIR
Since our last analysis, more upward trends have been recorded, although the currency pair is on a declining trend. A maximum of 3 consecutive days was reached. However, downward trends in the same period did not exceed 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 (0.75% ). The current value is 0.38% , 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.
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.
Source: WALFIR
Basic technical analysis supported short-term bullish sentiment last month. However, the exchange rate was hampered at an important level of resistance at 1.3800 and the long-term moving average. In addition, the divergence between price development and the RSI has recently motivated short-term bears. GBP/USD has also recently approached the demand zone (green rectangle) with a strong bottom, where is the Fibonacci retracement level of 23.60% .
Source: TradingView
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