Silver shining brightly post FOMC
Fawad Razaqzada March 17, 2016 9:17 PM
<p>With yields being universally low across the developed economies and the dollar falling, buck-denominated precious metals are shining. They have rallied strongly over the past […]</p>
With yields being universally low across the developed economies and the dollar falling, buck-denominated precious metals are shining. They have rallied strongly over the past couple of days in particular after the FOMC sounded more dovish than expected on Wednesday, which helped to push expectations about the next Federal Reserve rate increase further out. Other major central banks have also turned more dovish, with the ECB, for example, expanding its QE stimulus package and the BOJ cutting interest rates into the negative.
Today we are looking at the chart of silver, which is looking increasingly bullish. At the time of this writing the metal was testing the previous high at $15.95 and was threatening to break higher. Silver has already eroded a couple of bearish trend lines and has broken above some key resistance levels too – including $15.80 today, a level which could turn into support upon re-test. Meanwhile, the 50-day moving average is turning higher and the 200 is flattening. So watch out for an imminent “golden crossover,” which will be a further bullish development. The RSI indicator has broken above a descending trend line, after working off “overbought” conditions, as it drifted back below 70. So momentum is looking strong, too.
Therefore, as things stand, the path of least resistance is clearly to the upside for the precious metal. What could go wrong? Well, a number of things in fact. The dollar, for one, could find its feet again, while the whole commodities complex could come under pressure from renewed demand fears out of China. But for now at least, the technical outlook is looking bright for silver, and indeed many other precious metals including gold and platinum. Bearish speculators may therefore want to stay on the side-lines until the charts point to a trend reversal.
Some of the bullish targets are shown on the chart. Among these, the prior highs of around $16.30 is an interesting area to watch for this level also converges with the 127.2% Fibonacci extension of the most recent drop. Needless to say, an eventual break above that level could see the metal surge higher as more sellers abandon their positions and fresh buyers come into play. On the downside, a break back below support at $15.80 would be a bearish outcome. If this happens, it would suggest that the buyers are lacking confidence. Sensing this insecurity, the bears will be quick to pounce. For now, they are just waiting for the right moment. The right moment could be days, weeks or even months away.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.