Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.44% and -0.44% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.22% and -0.22% . Yesterday´s return was -0.11% , well below the first standard deviation. Our scoring is currently positive (2 ) for the month-on-month change and 3 for price indexation. This means that we are in the positive 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. As we can see in the chart below, all EUR/USD MAs are still in bullish sentiment. In the event of a decline, the monthly MA can be an important support for the exchange rate.
Source: WALFIR
Since the beginning of 2021 , there have been more upward trends, where we have also recorded a medium-term maximum of 6 consecutive days. Downward trends did not exceed more than 3 days in the same period. However, the maximum decrease was 7 days in the measured period. We could use the average long-term ATR (Average True Range) obtained from daily data (0.55% ) to estimate Stop Loss orders for our positions. The current value is 0.37% , which is below average. Approximately 90% confidence interval (return between -1.00% and 1.00% ) 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
The basic technical analysis shows the testing of this year’s highs. The exchange rate is still in a short-term uptrend, as it creates higher highs and higher lows. Breaking above the psychological level of 111.00 could motivate bulls. The USD/JPY is also currently far from the short-term moving average, which could act as support in the event of a pull back down. The divergence between pair development and the RSI, which has been created since the end of March, also supports this scenario. The demand zone (green rectangle) can be an important area in that case.
Source: TradingView
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