What’s inside:

  • Rally in silver prices slows down as expected
  • How the recent run is handled will be telling of next move; so far, so good
  • Short-term support and resistance levels noted

The rally in silver prices over the past few sessions has been impressive, so much so it pushed one of our favorite momentum measures into unusually high territory. The other day we noted that this skewed the bias to the upside in the short-term, but choppy trading conditions could begin to prevail as the market becomes in need of a rest (pullback).

At this time, after dipping to start the week off in Asia, silver is trading at the same price levels as it was on Thursday – the chop has begun, and should continue in the very near-term, but with a bullish twist. The up-move which started at the beginning of the month could be the next leg higher when looking at the broader picture, but we will need to first see how the market handles the current rally. Will the market digest the recent surge higher in a constructive manner before advancing, or will sellers soon step in earnest? It’s in the reaction to a major move valuable information gain be acquired. So far, things are looking good for another push higher.

The extreme market positioning previously discussed in the futures market has been correcting itself, and while speculative longs are still holding quite a large net long position, it’s not much larger than the one held prior to the April rally.

Short-term resistance comes in at 17.35 and then by way of several inflection points surrounding 17.55. Beyond that point there is no substantial price resistance until the April peak at 17.99. Support comes in the form of an upper parallel which didn’t prove to be pivotal as resistance, but is so far acting as support. More important support lies in the 16.70/90 vicinity.

Silver 2-hr

Silver Prices: Stalling, but with a Bullish Tone

Tomorrow kicks off the two-day FOMC meeting, with no expectations of a rate change on Wednesday; the focus will be on the policy statement and expected path of interest rates via the Fed’s ‘dot-plot’.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him at probinson@fxcm.com.