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 0.29% , well below the first standard deviation. Our scoring is currently positive (3 ) for the month-on-month change and 3 for price indexation. Both scorings range from -3 up to 3 , which means that we estimate the first very positive growth phase of the cycle. The development of the estimated cycles 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. XAU/USD recently fell below the medium-term MA. Therefore, as we can see in the chart below, all MAs currently support bearish sentiment.
Source: WALFIR
Recently, we have witnessed more downward trends, with the maximum level reaching 5 consecutive days. However, the maximum decrease was 6 days in the measured period. Since our last analysis, the upward trends have not exceeded more than 8 days, which is also the maximum for the last 3 years. We could use the average long-term ATR (Average True Range) obtained from daily data (1.57% ) to estimate Stop Loss orders for our positions. The current value is 0.93% , which is well below its long-term average. 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
Basic technical analysis supports short-term bearish sentiment after a dynamic decline in the previous week. XAU/USD is currently very close to the support level of 1 760 , where is also the Fibonacci retracement level of 50.00% . However, the divergence between price development and the RSI, which has developed since April, could support the bullish pullback. If the price continues to fall, the demand zone (green rectangle), where are also the Fibonacci retracement level of 61.80% and the psychological level of 1 700 , could also provide some support for the bulls.
Source: TradingView
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