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.
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.
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.
We could use the last decile of low to high returns (2.00% ) to estimate Profit Targets, as shown in the chart below.
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.