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Silver Price Resistance and Dollar Support Confluence

Silver Price Resistance and Dollar Support Confluence

2017-01-12 12:38:00
Paul Robinson, Strategist
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What’s inside:

  • Silver rally continues, heading into significant resistance
  • Gold trying to overtake 1200
  • DXY is dropping into support, an interesting confluence between precious metals is developing

DailyFX analysts’ Q1 forecasts are available on our Trading Guides page.

On Tuesday, we made note of resistance for the price of silver which was “right here, right now” by way of an upper parallel line tied to the bottom-side trend-line extending lower since October. That resistance turned out to be nothing more than a speed bump to what now looks to be a thorough testing of the 17 line in the works. We’ve been describing the recent rally as ‘corrective’ in nature, meaning at some point we are looking for renewed weakness. If this is to be the case, soon a turn lower needs to develop. A clean break into the low 17s would put into play the possibility of a higher high from December and the overtaking of a major level; it would be the first higher high since the downtrend began in July. This would force us to reevaluate the ‘correction’ thesis.

Silver: Daily

Silver Price Resistance and Dollar Support Confluence

Created with Tradingview

Gold is currently trading over 1200, a very big level. The Dollar is helping the situation along for precious metals, moving to its worst levels since mid-December. There is support for the US Dollar Index (DXY) in the 100.80/50 vicinity by way of slope line, minor pivot from December, and the 2015 high. With the 1-month inverse correlation between precious metals and DXY at over 80%, the timing of levels coming together could make for an interesting inflection point.

US Dollar Index (DXY)

Silver Price Resistance and Dollar Support Confluence

Created with Tradingview

We’ll be watching to see how silver handles resistance in the area of 17-17.24, as well as how DXY reacts to support. For traders looking to the short-side, a rejection around resistance could offer a good entry with the line-in-the-sand established. Traders who have been hanging onto longs, caution is warranted at this juncture. Fresh longs into resistance look risky, it needs to be cleared first before having room to run.

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---Written by Paul Robinson, Market Analyst

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