What's inside:
- Silver trading above resistance and clearly out of triangle formation
- US dollar break to offer tailwind
- Long-term trend-lines back to early 2015 and 2013 coming into focus
A few weeks back we began discussing silver prices and its potential paths if it could break free from the contracting price action unfolding. Indeed, we saw a breakout to the upside. This was not the preferred direction from an execution standpoint given it was against the prevailing downward trend. Counter trend triangle breakouts can be tougher to execute than the continuation variety. That is exactly what we have seen thus far – a difficult trade.
Once silver initially broke higher in late January it failed to capture the $14.40/50 area which had acted as key support and resistance since the middle of last year. Once failing at resistance silver then retested the triangle and held. Since then it has managed to find its way firmly above not only the all-important resistance, but to the highest levels since November.
Gold has held a firmer backdrop since late November/early December, with the coupling of both price and futures market positioning offering support. Bottom line, it has been the preferred long. That could be changing now as the landscape for silver changes as well.
The dollar took a nasty spill yesterday, the worst since March of last year. Given its break is coming from elevated levels near recent highs, there is good reason to believe it could be the ‘kick-off’ to something much larger. If this is the case then precious metals will receive a positive tailwind from dollar weakness.
The next area of contention for silver comes in the $15.10/25 area. In there lies a pair of trend-lines, depending on how they are drawn, extending back to January of 2015 and 2013. These coincide well with the roughly $1 measured move target the height of the triangle projects. Above there and we can start thinking about a move above the $16 mark and possibly higher as the big picture will be turning increasingly bullish.
Silver Daily: July '15 - Present
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX or email him directly at instructor@dailyfx.com
