What’s inside:
- Silver prices turn lower as anticipated
- Sharp rejection from resistance indicates lower prices ahead
- Watching for a lower high and break of rising slope support
To recap from yesterday: We laid out our logic explaining why the case was growing strong for a reversal in silver prices to begin very shortly; exhaustion-like price action coupled with an identified market tendency ran aground with pretty solid resistance – a perfect storm, if you will. (See yesterday’s commentary here.) The turn and burn with a vengeance gave us clear indication as to where sellers live and buyers don’t. While we didn’t expect that aggressive of a reversal to take shape (hard to predict), we will take it as our cue for lower prices ahead.
Silver (XAGUSD) Daily
But, wait, didn’t the dollar also experience a sharp downward reversal, too? It must have been confusing to some as not only did precious metals, and crude oil for that matter, get bludgeoned, but it happened while the market brought the hammer down on the dollar as well. This is exactly why it is best to not get married to the notion that precious metals must trade inversely to the dollar, at least not in the very short-run. Yes, over the long haul there is a solid inverse relationship, but it hems-and-haws as correlations tend to do.
Where do we go from here? The reversal was very, very sharp; the kind of rejection at key resistance which clearly dents the chart and tilts the bias lower. Gold put in a pretty ‘sweet’ reversal bar as well after attempting to break strongly above the 1300 threshold.
Moving forward we will be looking for a lower high to develop soon. The bounce underway at this time is coming from the lower parallel extending back to June 1, and given how well the top-side line acted as support once it was crossed, it adds even more weight to the lower line as a point of support. With that said, however, support is not anticipated to hold for long given how fierce of a reversal from resistance we saw on the daily time-frame. A break below the trend-line and yesterday’s low of 17.13 should lead to a nice continuation short.
2-hr
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him directly at instructor@dailyfx.com
