Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.48% and -1.53% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.75% and -0.71% . Friday´s return was 0.48% , well below the first standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and -3 for price indexation. It is currently in a very negative phase of the cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical system 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. The price of XPD/USD has been declining dynamically over the last month. All MAs therefore support bearish sentiment.
Since our last analysis, we have witnessed more declining trends, with the maximum level reaching 6 consecutive days, which also represents the overall maximum in the measured period (last 3 years). The upward trends have not exceeded more than 1 day in the last period. However, the maximum in the measured period is 14 days. We could use the average long-term ATR (Average True Range) obtained from daily data (3.20% ) to estimate Stop Loss orders for our positions. The current value is 3.86% , which is slightly above average. Approximately 90% confidence interval (return between -3.0% and 3.0% ) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (5.25% ) to estimate Profit Targets, as shown in the chart below.
The basic technical analysis points to volatile development since the beginning of this year. Three short-term dynamic corrections brought the price to an important zone. XPD/USD is currently well below both moving averages. However, it is in the long-term demand zone (green rectangle), where is also the Fibonacci retracement level of 78.60% . In addition, a positive scenario could be supported by a divergence between the price development and the RSI. A further drop below the zone could result in a test of lows at the beginning of the COVID-19 pandemic.