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What’s inside:

  • Weakness continues, nearing trend-line support
  • Channel off May peak provides guidance to the down-side
  • High impact events: Today, ECB; Tomorrow, NFP

Silver prices continued to inch lower yesterday, coming close to tagging the trend-line off the January lows we noted in the last update. Today, thus far we are seeing a small bounce as we head towards the U.S. session.

A rebound off trend support could soon develop on a full test, but until the bearish trend structure off the early May peak is broken and the futures market shows a further reduction in speculative long holdings, rallies will continue to be viewed as selling opportunities.

The first level of resistance lies not far ahead around 16.15. Beyond there we will look to the top-side of the channel silver has been confined in for the past month; this is a quickly moving downward target given the steep slope, currently clocking in around 16.30. A breakout above the downward sloping channel would be the first sign a broader recovery could be taking shape.

For traders looking to play a bounce off trend-line support, price action along the trend-line needs to exhibit life before seeing a meaningful bounce develop.

Silver (XAGUSD) Daily

Silver Prices: Channel Confinement Keeps Bearish Tilt in Place

Created in Marketscope II

Looking at the hourly chart we can see how in control sellers are at this time with the clean series of lower lows and lower highs in place. Trend-line support isn't far below on the daily, but for short-term traders until this bearish sequence is challenged the path of least resistance remains clear.

Hourly

Silver Prices: Channel Confinement Keeps Bearish Tilt in Place

Created in Marketscope II

High Impact Event Risk: Today, we have the ECB announcement at 11:45 GMT time, followed by the press conference at 12:30. The market isn’t expecting the central bank to make any changes to its current monetary policy, but the Draghi press conference could spark volatility across financial markets. While silver isn’t directly impacted, reverberations could be felt if there is a strong reaction in the euro and other risk assets.

Tomorrow, at 12:30 the U.S. jobs report will be released, with the market expecting non-farm payrolls to show the economy added 161k jobs in May and the unemployment rate moving lower to 4.9% from 5% in April. Signs of wage growth (inflation) will be of interest as well; average hourly earnings grew by 2.5% YoY in April.

Check out our 2016 forecasts in one of our many free trading guides.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at instructor@dailyfx.com with any questions, comments, or concerns.