Bias: Long Silver on Aggressive Move Higher Despite USD Strength
Point to Establish Long Exposure: Spot at the Market
Spot: $19.37/oz
Target 1: $21.11/oz 2016 High
Target 2: $25.01/oz August 2013 High
Invalidation Level: Close below $18.40/oz
Fundamental & Technical Focus:
Given the resilience of the US Dollar post-Jackson Hole, many would think that Precious Metals would be turning lower aggressively. Such is not the case with Silver (CFD: XAGUSD.) Besides being higher YTD of ~40%, the technical picture continues to look constructive for further gains as another breakout higher could be in the works.
Friday’s disappointing NFP does not provide a credible narrative for the strong move higher in Silver as a 2016 rate hike remains priced in per Bloomberg’s data. One fascinating development is what may happen to Silver if the US Dollar strength isn’t sustained. Whether it comes from weak data leading to the September 21 Federal Reserve meeting or doubts creep in about the previously mentioned hike, any setback in the US Dollar, which is inversely correlated to Silver could further post the Precious metal price.
Chart:
XAG/USD Resistance & Support Levels
2nd resistance: $21.11/oz July High
1st resistance: $20.52/oz August 10 High
Spot: $19.37/oz
1st support: $18.36/oz August 26 Low
2nd support: $17.82/oz 61.8% Retracement of June-July Range
While an entry at the market may seem extreme, if this is a wave 3, then a breakout could be soon upon us. The trade’s target aligns with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading.
Trader Sentiment Shows XAGUSD Could Move Either Way:
The ratio of long to short positions in the XAUUSD stands at 1.10, as 52% of traders are long. Yesterday the ratio was 1.16; 54% of open positions were long. Long positions are 16.3% lower than yesterday and 9.4% below levels seen last week.Short positions are 11.2% lower than yesterday and 30.2% below levels seen last week. Open interest is 13.9% lower than yesterday and 38.2% below its monthly average.
We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the XAUUSD may continue lower. The trading crowd has grown less net-long from yesterday but unchanged since last week.
T.Y.
