It could go anywhere, really
The Xenobladeseries has prided itself on basically doing whatever the hell it wants to between entries. Although there has been a tiny cute, mostly challenge mode oriented crossover between the first and second games and some light references, all of them, including X, feature completely different cast members and tell their own isolated story. That allows developer Monolith Soft some leeway, anddirector Tetsuya Takahashi knows it.
Speaking to USGamer, Takahashi explained that Xenoblade Chronicles 2“exceeded [his] expectations,” and that the North American and European regions in particular really rallied behind it. Takahashi says that the TornaDLC expansion is also doing well in Japan.
As for a future entry, it seems as if Monolith Soft is going to do the whole “reset button” thing all over again and not rest on their laurels. When asked whether or not the game would be more fantasy-themed (like Xenoblade 2) or tech-themed (like X), Takahashi said there was also a “third option.” He elaborated, saying that he’s “someone who gets bored of whatever it was [he] did last,” and that it “might go down a path it hasn’t gone before.”
Bring it on. After all this time the Xenobladeseries has developed quite a fanbase, and I’m sure if the quality is there Monolith Soft will expanded even further.