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.
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.
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.
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 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 .