Greenback Energy Brings Silver to its Knees

Silver Outlook:

Jackson Gap Symposium: Doom and Gloom for Silver?

Because the coronavirus pandemic wreaked havoc within the markets, demand for Gold and its Silver counterpart elevated, whereas the Greenback struggled to remain afloat. In the meantime, the USD has managed to rebound barely after a collection of optimistic financial information mixed with the authorization of a possible Covid-19 vaccine led to renewed hopes of an financial restoration.

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Following the FOMC minutes final week the place Fed Chairman Jerome Powell as soon as once more confirmed that low rates of interest will stay for the foreseeable future, limitless quantitative easing (QE), a ballooning stability sheet and low treasury yields proceed to stay a trigger for concern. This attracts our consideration to what’s in all probability the biggest occasion threat of the week, the Federal Reserve’s Jackson Gap Financial Coverage Symposium which is scheduled to happen on Thursday 27 August at 9:10 am (EST). On this occasion, Jerome Powell is predicted to make clear the longer term path of financial coverage and will doubtlessly set the inspiration for September’s assembly.

Fibonacci Assist Holds Bulls at Bay

After 5 consecutive months of positive factors, silver has stumbled right into a key stage of Fibonacci help, diminishing the hopes of a bullish continuation.

The month-to-month chart beneath highlights Fibonacci ranges from two main strikes. The primary Fibonacci retracement (pink) represents the historic transfer between the September 2008 low and the March 2011 excessive, whereas the second Fibonacci (blue) represents the short-term transfer, plotted between the March 2011 excessive and the March 2020 low.

XAG/USD Month-to-month Chart

Chart Ready by Tammy Da Costa, IG

After recovering from March lows, a powerful bullish development has been current, with the value of silver seeking to testing a contemporary excessive at first of August. Nevertheless, this stage, which is the 50% retracement stage of the historic transfer, continues to carry robust, exerting downward strain on the dear steel.

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CCI Falls Beneath -100

In the meantime, from a shorter-term perspective, the Commodity Channel Index (CCI), a technical indicator used to measure the value of an asset in relation to its current common, has fallen beneath -100 as indicated on the four-hour chart beneath, a potential indication that downward momentum could also be slowing, with worth motion probably forming a penchant for imply reversion as costs fall into oversold territory.

Silver 4-Hour Chart

Chart Ready by Tammy Da Costa, IG

Shifting Ahead

• As costs proceed to consolidate between the important thing help and resistance stage, renewed USD weak spot might see an extension of the bullish development, with costs retesting 2918.8, the 50% retracement of the first transfer.
• If this stage is damaged, the 3000 psychological stage can be the following stage of curiosity.
• A break beneath 2605.3, the 38.2% retracement of the secondary transfer, could lead to additional downward strain, with a potential reversal in the direction of 2500.

Shopper Sentiment

In line with consumer sentiment, on the time of writing, majority of retail merchants are exhibiting a bullish bias in the direction of Silver, with 84% of merchants holding lengthy positions. We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-long means that costs could fall amid indicators of an extra US Greenback power.

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— Written by Tammy DaCosta, Market Author for DailyFX.com

Contact and comply with Tammy on Twitter: @Tams707