Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.30% and -1.37% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.67% and -0.62% . Friday´s return was -1.16% , well below the first standard deviation. Our scoring is currently slightly positive (1 ) for the month-on-month change and 1 for price indexation. Both scorings range from -3 up to 3 . Indexing is currently on its way north. 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. XAG/USD fell below short-term and long-term MAs last week. Therefore, as we can see in the chart below, all MAs support bearish sentiment.
Since our last analysis, there have been more declining trends, with a maximum of 5 consecutive days. The total maximum for the downtrend for the last 3 years is 8 days. Upward trends have not exceeded more than 3 consecutive days in recent months. The total maximum for the last 3 years is 6 days. We could use the average long-term ATR (Average True Range) obtained from daily data (3.30% ) to estimate Stop Loss orders for our positions. The current value is 1.94% , which is below the average value. 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 (4.50% ) to estimate Profit Targets, as shown in the chart below.
The basic technical analysis points to neutral sentiment in recent months. XAG/USD is currently very close to the psychological level of 25.00 . In addition, it is in the demand zone (green rectangle), where are also the Fibonacci retracement level of 23.60% and the long-term moving average. The divergence between price development and the RSI could also motive short-term bulls. In the event of a further decline below the demand zone, bears could push the price to 22.00 or even close to the psychological level of 20.00 .