Silver has fallen back towards the $24.50 level this morning as US 10-year treasury yields moves back towards the best levels of the year, and the price of gold edges back towards the $1,700 support level.
The recent news surrounding Archegos Capital has reignited a strong bid-tone back in the US dollar index, while major investment banks, such as Nomura and Credit Suisse incurred losses of greater than 10 percent on Wall Street yesterday.
Precious metals tend to perform poorly when the US dollar currency is in demand due to traders seeking it out due to its safe haven status. During the February and March 2020 COVID-19 inspired stock market crash, the price of gold and silver fell sharply, while the US dollar surged.
Looking ahead, silver traders are likely to focus on two key events this week. Firstly,
President Biden’s speech tomorrow on Infrastructure is expected to focus on the announcement of a $3 trillion spending plan, which should be supportive of silver prices.
Silver is a key component in a number of electric goods, and major infrastructure and green spending bill would cause huge demand for physical silver. Additionally, silver and gold could benefit over fears about the unprecedented levels of government spending in the US.
Secondly, the US jobs report this week is likely to be a big mover to the US dollar, hence we could see a major bout of volatility in silver. A stronger-than-expected number and silver prices could come under further selling pressure due to fears that the FED are closer than the market had expected in regard to scaling back QE.
The recent rejection from the $26.00 resistance level is incredibly bearish for silver on the technical front. Extended weakness below the $24.90 level this week and the short-term technicals look even worse.
According to the ActivTrader Market Sentiment tool traders have turned even more bullish towards silver, despite the major rejection from the $26.00 level and lack of demand above $25.00.
Sentiment is 91 percent positive, which is a significant one-way skew. I believe that silver prices will continue to fall as the majority of traders are long. Typically, fading marking sentiment yields solid results.
Silver short-term Technical Analysis
The short-term technicals for silver show that a bearish breakout from a rising wedge pattern has recently taken place on the four-hour time frame, further increasing selling pressure towards the shiny metal.
According to the overall size of the rising wedge pattern the price of silver could be set to drop towards the $24.00 level. Key short-term resistance for silver is found at the $25.30 and $25.50 levels.
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Silver Medium-term Technical Analysis
According to the daily time frame bulls need defend $24.90 area to avoid a technical meltdown over the medium-term horizon.
A bearish head and shoulders pattern, with a downside projection of over $5.00 is currently in play and is warning of a coming decline towards the $20.00 support level.
Traders also note that silver is pressure close to its key 200-day moving average this week, around the $24.50 support area. Selling towards silver could significantly increase below this key technical barometer.
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