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Silver Prices Aim Lower as Markets Hint Broad Selloff to Resume

Silver Prices Aim Lower as Markets Hint Broad Selloff to Resume

Ilya Spivak, Head Strategist, APAC

SILVER PRICES, US DOLLAR, STOCKS, S&P 500, CORONAVIRUS – Talking Points:

  • Silver prices echo traders’ liquidity demand amid Covid-19 outbreak
  • Break of rising trend support suggests downtrend might be resuming
  • Downturn may reflect broader credit stress returning across markets

Silver prices have been tracking alongside stocks and inversely of the US Dollar amid the coronavirus outbreak. The metal plunged alongside a broad spectrum of assets such as stocks, most G10 FX currencies, cycle-sensitive commodities and gold in the second half of March as widespread lockdowns brought the global economy to a standstill, pressuring credit markets and inspiring liquidation.

Not surprisingly, the US Dollar thrived against this backdrop. The most liquid form of cash available was a natural beneficiary as financing costs spiked and market participants divested portfolios to assure access to capital and reduce exposure to breakneck volatility. An about-face reversal was triggered as the Fed rushed out a series of back-to-back easing measures, reducing funding stress.

Silver price vs US Dollar, S&P 500 price chart

Silver price 4-hour chart created with TradingView

Prices now appear to be re-engaging the downtrend. A break of rising trendline support guiding the recovery form mid-March lows now argues for a bearish pivot in the near-term directional bias. Positioning seems to imply that a corrective upswing has run its course and downside progress is on the cusp of resumption. Immediate support is in the 13.55-82 zone. Breaking above 15.84 may neutralize selling pressure.

Silver price chart, XAG/USD, technical analysis

Silver price 4-hour chart created with TradingView

What this reversal may imply about broader market sentiment remains to be seen. Still, silver’s gearing toward the pro-risk, anti-USD side of the increasingly binary asset universe is eye-catching. Renewed selling pressure may speak to a broader-based capitulation of recent optimism as markets absorb the Fed’s credit-boosting actions, refocusing on the dire state of the global business cycle.

RESOURCES FOR TRADERS

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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

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