Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.77% and -0.77% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.40% and -0.36% . Friday´s return was 0.86% . Our scoring is currently positive (3 ) for the month-on-month change and 0 for price indexation. The change is very positive in this case and the indexation is currently in the last growth phase of the cycle. Both scorings range from -3 up to 3 . The estimated cycles development 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. XAU/USD is in bullish sentiment in the case of monthly and 6 months MAs, after rising above it in recent days. As we can see in the chart below, the annual MA still supports bearish sentiment and currently acts as a resistance to the spot price.
Recently, we have witnessed more upward trends, with the maximum level reaching 4 consecutive days. However, the maximum increase was 8 days in the measured period. Since the beginning of 2021 , the declining trends have not exceeded more than 5 days. We could use the average long-term ATR (Average True Range) obtained from daily data (1.56% ) to estimate Stop Loss orders for our positions. The current value is 1.25% . Approximately 90% confidence interval (return between -1.6% and 1.6% ) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (2.50% ) to estimate Profit Targets, as shown in the chart below.
The basic technical analysis still supports short-term bullish sentiment, as the exchange rate has been creating higher lows and higher high since March. XAU/USD is currently very close to the important psychological level of 1 850 , where is also the Fibonacci retracement level of 38.20% . In addition, the long-term moving average acts as a resistance. The divergence between price development and the RSI, which has developed since the beginning of this year, could support the bearish scenario. If the price starts to fall, the Fibonacci retracement level of 50% and the short-term moving average could be a strong support.