Silver Prices Trade Lower On A Strong Dollar

2016-03-01 12:21:00

Alejandro Zambrano, Market Analyst

Talking Points

Silver prices are short-term bearish below the January 25 high of $15.34 and may reach Friday’s low of $14.36.
The two prominent price drivers are the US Dollar and S&P 500.
A stronger than expected reading of U.S. ISM manufacturing may suppress silver prices, while a softer reading may trigger a gain in silver. A Bloomberg News survey projects that U.S. ISM manufacturing will reach 48.5 from 48.2.

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold

Silver prices are short-term bearish below the January 25 high of $15.34 and as long as price trades below this high, it may reach Friday’s low of $14.36. On a breach to the Friday low, silver may reach the February 2 low of $14.23.

The two prominent drivers for the lower silver prices are the US Dollar and S&P 500. Firstly, the Dollar has gained as traders have started to price in rate hikes by the Fed. Secondly, stock markets are higher, which lowers the need for safe haven assets such as silver. The FXCM US Dollar’s daily correlation to silver from February 1 is -0.45 and for the S&P 500 it is -0.41.

Traders not short might use a corrective bounce to short-sell and the interval of $15 to $15.23 may be a likely reversal zone. This range is derived using Fibonacci retracement levels based on the decline from last week’s high of $15.60 to last week’s low of $14.36. Please see the chart below.

U.S. ISM Manufacturing

U.S. ISM manufacturing may suppress silver prices if today’s reading beats the 48.5 projected outcome by a Bloomberg News survey. On a disappointment to this level, silver may gain.

Markit U.S. Mfg. PMI second iteration will be realized before the ISM report and may move silver, but as it’s the second estimate, it may fail to surprise the markets and it is likely that volatility will remain muted until the ISM release. U.S. Construction Spending figures for January are also due to be published shortly.

For more data reports, which may influence silver prices, please see our economic calendar.

Silver Prices | FXCM: XAG/USD