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 -0.08% . Our scoring is currently positive (2 ) for the month-on-month change and 1 for price indexation. Both scorings range from -3 up to 3 . Indexation is currently in a growing phase of the cycle. The estimated cycles development based on our analytical system 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. The XAU/USD is in bullish sentiment in the case of monthly MA, after rising above it in recent days. As we can see in the chart below, the 6 months and annual MAs still support bearish sentiment.
Source: WALFIR
Recently, there have been more downward trends, with the maximum level reaching 5 consecutive days. More negative days for this commodity last appeared at the end of 2018 . Upward trends did not exceed more than 1 day in the same period. In the first days of this year, however, we witnessed 5 positive days. We could use the average annual ATR (Average True Range) obtained from daily data (1.59% ) to estimate Stop Loss orders for our positions. The current value is 0.85% . Approximately 90% confidence interval (return between -1.6% and 1.6% ) is shown in the histogram below by a red rectangle.
Source: WALFIR
We could use the last decile of low to high returns (2.50% ) to estimate Profit Targets, as shown in the chart below.
Source: WALFIR
The basic technical analysis points to neutral sentiment for the last month after the sideways development of the price. The XAU/USD is currently in the demand zone (green rectangle), where the Fibonacci retracement level of 61.80% is also, along with the psychological level of 1 700 . In addition, the spot price has created a double bottom pattern that could motivate bulls. The divergence between price development and the RSI created in the last 4 months could support this scenario. If the price breaks above 1 760 , where the Fibonacci retracement level of 50% is also, we could see its increase to the resistance line of 1 850 .
Source: TradingView
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