Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.58% and -0.60% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.30% and -0.28% . Yesterday´s return was 0.47% , well below the first standard deviation. Our scoring is currently negative (-1 ) for the month-on-month change and -2 for price indexation. This means that we are in the negative 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 the monthly MA, NZD/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. This has already happened this year.
Source: WALFIR
Since the beginning of 2021 , there have been more upward trends, with a maximum of 4 consecutive days. Downward trends did not exceed more than 3 days in the same period. The maximum in the measured period is 8 days. We could use the average long-term ATR (Average True Range) obtained from daily data (1.01% ) to estimate Stop Loss orders for our positions. The current value is 0.72% . Approximately 90% confidence interval (return between -1.2% and 1.2% ) is shown in the histogram below by a red rectangle.
Source: WALFIR
We could use the last decile of low to high returns (2.00% ) to estimate Profit Targets, as shown in the chart below.
Source: WALFIR
Basic technical analysis still supports longer-term bullish sentiment, as the exchange rate creates higher highs and higher lows. This pair has been in the stabilization phase since our last analysis. The short-term moving average acts as a strong support. However, we can clearly see the bearish divergence between the market price and the RSI, which pushes the pair down. NZD/USD is currently also close to an important psychological level of 0.7200 . In the event of a further decline, the psychological level of 0.7000 , the long-term moving average and the Fibonacci retracement level of 23.60% could be a strong support for bulls.
Source: TradingView
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