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.
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.
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.
We could use the last decile of low to high returns (1.50% ) to estimate Profit Targets, as shown in the chart below.
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% .