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Silver Price Buckles on USD Bounce from Support; Targeting Long-term Trend-line

Silver Price Buckles on USD Bounce from Support; Targeting Long-term Trend-line

What’s inside:

  • Silver price put in key reversal last week, followed through on Friday’s solid U.S. jobs report
  • US dollar bouncing from long-term support, putting pressure on precious metals
  • Still targeting the 2003 long-term trend-line as objective before possibly turning bullish

Find out in the Q3 Forecast what’s driving Gold & Silver this quarter.

In last week’s post, at the time of writing silver prices were putting in a key reversal bar on the daily time-frame but still needed to finish the day with the same look before considering it to be a valid bearish bar formation (We discussed the importance of waiting for the close of candlesticks in this webinar.) The reversal-bar formed at an important cross-road of resistance by way of the April trend-line and around the peak of a bounce back in June.

Silver: Daily

Friday’s overall positive U.S. jobs report sparked buying in the US dollar at a critical long-term area of support, and subsequently led to heavy selling in precious metals. This is what we had to say Wednesday regarding the relationship: “The inverse correlation between precious metals and the dollar has been strong, and on that a big turn in the buck, as long as the relationship stays intact, could spur selling in precious metals.” The one-month correlation between silver and the US Dollar Index (DXY) is at -91%, about as negative as it can get. The strength of this relationship oscillates, but for now USD is in charge here as it bounces from major support.

US Dollar Index (DXY): Weekly

Where is silver headed from here? For starters, as long as it doesn’t trade above last week’s high at 16.96 then we look for the downturn to continue to follow through. Trade back above the Wednesday high would put our bearish bias on hold. The target continues to be the 2003 trend-line which arrives around 15. Should silver melt to that juncture then depending on how price action plays out we might look for a sustainable low to develop.

Join Paul live every Tuesday at 9 GMT for his technical outlook for indices and commodities.

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.