Silver Updates by Solid ECN

[SOLIDECN]

The price may fall.​

On the daily chart, the first wave of the higher level (1) of 3 formed, a downward correction developed as the wave (2) of 3, and the third wave (3) of 3 forms. Now, the first wave of the lower level 1 of (3) has formed, and a local correction is developing as the wave 2 of (3), within which the wave b of 2 is ending.

If the assumption is correct, after the end of the correction, the price will fall to the levels of 24.18 - 23.52. In this scenario, critical stop loss level is 26.92.​

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[SOLIDECN]

Silver prices remain under pressure​

During the Asian session, silver quotes are growing slightly, trying to recover from a sharp decline at the beginning of the week, which led to a short-term update of local lows since February 25. Yesterday, the XAGUSD pair showed a particularly strong decline, reacting to statements by members of the delegations of the negotiation process between Russia and Ukraine about achieving a "breakthrough" in discussions of the non-bloc status. At the same time, the most painful issues of the disputed territories remain open. According to the Ukrainian delegation, the discussion of the territories of the Donetsk and Luhansk People's Republics should take place at heads of state, but so far, there are no prerequisites for a meeting between Vladimir Putin and Vladimir Zelensky.

Meanwhile, the demand for silver and gold as shelter assets remains quite high. According to analysts, global demand for silver has continued to grow steadily in recent years, and in 2022 it could reach a record level, catching up with such leaders as gold, palladium, or platinum. Analysts from the Silver Institute expect demand for the precious metal to increase by 8% for the year to a record of 1.112B ounces. On the other hand, silver is primarily an industrial material, and much will depend on the state of the global economy, which is now recovering but showing worrisome inflationary risks.

On the daily chart, Bollinger Bands are steadily declining. The price range is narrowing, reflecting the emergence of ambiguous trading dynamics in the short term. The MACD indicator is going down, keeping a strong sell signal (the histogram is below the signal line). Stochastic is also dominated by "bears," approximately in the center of its working area. The current readings of the indicator signal in favor of the development of a corrective decline in the short and/or ultra-short term.

Resistance levels: 25, 25.35, 25.58, 26 | Support levels: 24.67, 24.42, 24, 23.6​

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[SOLIDECN]

XAGUSD, the pair may fall.​

On the daily chart, the first wave of the higher level (1) of 3 formed, a downward correction developed as the wave (2) of 3, and the third wave (3) of 3 forms. Now, the first wave of the lower level 1 of (3) has formed, and a local correction is developing as the wave 2 of (3), within which the wave c of 2 is fomring.

If the assumption is correct, the price will fall to the levels of 23.52 - 22.73. In this scenario, critical stop loss level is 25.12.​

 

[SOLIDECN]

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Silver prices are falling during the Asian session, correcting after yesterday's attempt to grow. The instrument is now testing the level 24.2 for a breakdown and waiting for new signals.

The situation on the market is changing slightly since there are no prerequisites for the completion of a special military operation initiated by the Russian authorities on the territory of Ukraine. Moreover, the economic outlook is only worsening as more sanctions are imposed on the Russian economy. In particular, yesterday, the EU announced its intention to expand the list of goods banned from imports from Russia, but analysts report that this package of sanctions has not been agreed upon so far. The project involves a ban on importing coal and some agricultural products, in particular, potash fertilizers. Certain foodstuffs may also be subject to restrictions. According to experts, sanctions could cost the economy about 9B euros a year.

The pressure on the instrument's position is exerted by the growth in the yield of US Treasury bonds. The minutes of the US Federal Reserve's Open Market Committee (FOMC) published yesterday reflected the regulator's readiness to accelerate the tightening of monetary policy, including through the launch of a quantitative tightening program. Similar sentiments can be traced in the speeches official representatives of the regulator, for example, Lael Brainard, who is known for her rather reserved position.​

On the daily chart, Bollinger Bands are steadily declining. The price range expands, letting the "bears" renew local lows. The MACD indicator is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic shows similar dynamics but is approaching the level of 20, which indicates that silver may become oversold in the ultra-short term.

Resistance levels: 24.42, 24.67, 25, 25.35 | Support levels: 24, 23.6, 23.32, 23​

 

[SOLIDECN]

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On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) formed, and a local correction develops as the wave 2 of (3). Now, the wave c of 2 is forming, within which the third wave (iii) of c is developing.

If the assumption is correct, the price will fall to the levels of 23.52 - 22.73. In this scenario, critical stop loss level is 25.12.

 

[SOLIDECN]

On Tuesday, the metal traded 1% higher, jumping toward 25.40 USD as traders sold the USD and bought everything else following the recent inflation report. The CPI for March came out above expectations and printed 8.5% yearly (up from 7.9% in February), while the monthly change jumped from 0.8% to 1.2%. However, the core CPI rose only a notch to 6.5% against expectations of 6.6% and actually decreased monthly from 0.5% to 0.3%, which could have been the main reason behind the euphoric growth of nearly every asset class.

"USD remains supported due to the Fed's active monetary policy, but a lot has been priced in as regards monetary policy so that USD will probably find it increasingly difficult to appreciate further." economists at Commerzbank reported ahead of the data, which came true.

Silver is now pushing toward the critical resistance of previous highs near 26.40 USD. However, if broken to the upside, further gains to 25.80 USD seem likely. Alternatively, if sentiment worsens again, we might see a drop to today's lows near 24.80 USD, which might be the essential short-term support.

 

[SOLIDECN]

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Silver prices show a weak increase during the Asian session, retesting the level of 25.5. The instrument has been developing a fairly active uptrend since April 6, retreating from local lows since the end of last month and receiving support from statistics on record inflation in the world. Given the high Consumer Price Index in the US, which reached 8.5% in March, as well as the growing geopolitical uncertainty against the backdrop of the development of the Russian-Ukrainian conflict and severe anti-COVID restrictions in China, the demand for defensive assets remains elevated.

Macroeconomic statistics released the day before showed an increase in annual consumer inflation in the US to 8.5%, which was a new record high for 41 years. At the same time, a sharp tightening of the US Federal Reserve's monetary policy is expected in May: in addition to the expected rate hike by 50 basis points at once, a quantitative tightening program may also be launched to correct its balance.

Additional support for the metal comes from the prospect of a gradual lifting of COVID restrictions in China, while the restoration of industrial activity. The Chinese authorities announced the easing of a number of quarantine measures in parts of Shanghai, which will affect almost 5 million people, since there were no new cases of coronavirus infection over the past two weeks. Silver, unlike gold, is more actively used in industry, and therefore reacts sharply to such factors.
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Bollinger Bands in D1 chart demonstrate flat dynamics. The price range remains practically unchanged, limiting the development of "bullish" dynamics in the short term. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of overbought instrument in the ultra-short term.

Resistance levels: 25.58, 26, 26.27, 26.57 | Support levels: 25.35, 25, 24.67, 24.42​

 

[SOLIDECN]

On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) formed, and a local correction ended as the wave 2 of (3). Now, the development of the third wave 3 of (3) has started, within which the first wave of the lower level i of 3 is forming.

If the assumption is correct, the price will grow to the levels of 27.5 - 28.5. In this scenario, critical stop loss level is 24.09.

 

[SOLIDECN]

Silver prices show a moderate decline during the Asian session, developing a strong "bearish" momentum formed the day before. The instrument is testing the level of 25 for a breakdown, updating local lows from April 12.

High US bond yields approaching multi-year highs (10-year bonds are trading around 2.95%), as well as the growth of the USD Index to the peaks of April 2020, are probably the main reasons why the "bulls" decided to take their profits. In addition, traders expect an early tightening of monetary policy by the US Federal Reserve. The rate hike by 50 basis points, as well as the launch of the quantitative tightening program are expected already during the May meeting of the regulator. What is more, St. Louis Fed Chair James Bullard said on Monday that he is open to the theoretical possibility of a rate hike of up to 75 basis points at once, although this will not be considered a "main scenario".

Pressure on silver quotes is also exerted by not the most confident macroeconomic statistics from China. Data published earlier in the week showed a slowdown in Industrial Production in China in March from 7.5% to 5%, which, however, turned out to be better than market expectations at the level of 4.5%. Analysts attribute the slowdown in manufacturing activity in China to a new outbreak of coronavirus, as a result of which the Chinese authorities announced the introduction of quarantine in a number of provinces, following the policy of "zero tolerance".

In the D1 chart, Bollinger Bands are reversing horizontally. The price range is almost unchanged, but it remains rather spacious for the current level of activity in the market. MACD is going down, keeping a fairly stable sell signal (located below the signal line). Stochastic shows a more confident decline, but is quickly approaching its lows, indicating the growing risks of the oversold pound in the ultra-short term.

Resistance levels: 25.35, 25.58, 26, 26.19 | Support levels: 25, 24.67, 24.42, 24

 

[SOLIDECN]

After reaching local highs of around 26 dollars per ounce, the quotes of the trading instrument show a local sideways trend and are now around 25.05.

The XAGUSD pair is preparing to continue growing against the backdrop of a positive report from the Silver Institute on the state of the precious metal market and experts' forecasts for the current year. Thus, in 2021, global industrial demand amounted to 508.2M ounces, adding 9% to the value of the previous year, while silver bullion sales increased immediately by 36% to 278.7M ounces, the highest figure in the last seven years, and total demand for the year increased 19% to 1.05B ounces.

As for the forecast for 2022, analysts expect continued positive dynamics and investor interest in the assets of the metal group. Industrial demand for silver is estimated to increase by 6% to 539.6 M ounces, while overall supply could rise by 3% to 1.03B ounces. In general, the overall forecast for the year is positive, and according to the specialists of the Silver Institute, the deficit in the world market will be about 70M ounces.

The price moves within the global ascending corridor, declining after reaching the resistance line. Technical indicators keep a buy signal, but their readings work out a local correction: indicator Alligator's EMA fluctuations range began to narrow, and the histogram of the AO oscillator forms downward bars in the buying zone.

Resistance levels: 26, 27.4 | Support levels: 24.55, 23.1[/JUSTIFY]

 

[SOLIDECN]

On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) has formed, and a local correction develops as the wave 2 of (3). Now, the wave c of 2 is developing, within which the first wave of the lower level (i) of c of 2 has formed.

If the assumption is correct, after the end of the correctional wave (ii) of c the price will fall to the levels of 23.52 - 22.73. In this scenario, critical stop loss level is 25.25.

 

[SOLIDECN]

Silver quotes show a local downtrend, trading around 23.56.

The pressure on the instrument is still exerted by expectations of further tightening of monetary policy by the US Federal Reserve. Already during the May meeting, members of the Fed can raise the key interest rate by 50 basis points, as well as launch a quantitative tightening program. High interest rates have always been an obstacle to the growth of the precious metals market. The second negative factor is the US bond market, which has been at its highs of 2018. The high yields of Treasuries look much more attractive to investors than riskier assets such as gold and silver. Finally, a more long-term negative factor is the withdrawal of the London Metal Exchange (LME) from the global precious metals trading market. The day before, representatives of the trading platform announced the termination of all transactions with these assets until July 11 due to a drop in demand for contracts for gold and silver; however, experts attribute this event to recent reports of the withdrawal of contracts for nickel.

Over the past week, the demand for silver, according to the US Commodity Futures Trading Commission (CFTC), remained virtually unchanged: the number of net speculative positions in the precious metal amounted to 46.4K against 46.0K a week earlier.

The price is trading within the global ascending corridor, approaching the support line. Technical indicators have already reversed and issued a sell signal: the fast Alligator indicator EMAs crossed the signal line from above, and the histogram of the AO oscillator is forming descending bars in the sales area.

Support levels: 23, 21.4 | Resistance levels: 23.95, 25.8​

 

[SOLIDECN]

High probability of pair growth.
On the daily chart, the development of the third wave of the higher level (3) of 3 has begun, in which the first wave of the lower level 1 of (3) has formed and the local correction continues to develop as wave 2 of (3). At the moment, wave c of 2 is being built, within which the formation of the fifth wave of the lower level (v) of с of 2 is being completed.

If the assumption is correct, the price of XAGUSD will continue to move towards the area of 24.12 - 26.2. The level of 21.4 is critical and stop-loss for this scenario.

 

[SOLIDECN]

Despite the fact that the US Fed has moved to a decisive tightening of monetary policy and yesterday raised the interest rate immediately by 50 basis points to 1.00%, commodities reacted to this with an increase in quotations. Most likely, traders put the regulator's decision in the prices of trading instruments long before the official announcement. Since the analysts' forecast on the adjustment of the rate value was justified, the USD began a downward correction.

An additional factor that prevented the exchange rate of the XAG/USD pair from continuing the April decline is the restoration of production processes in China. While cities such as Shanghai and Beijing continue to adhere to the principles of a dynamic zero tolerance policy for COVID-19, regardless of the economic costs, Hong Kong announced the easing of anti-COVID measures from May 5. On Monday, the number of new cases of coronavirus infection in the metropolis fell below 300 for the first time in almost three months — to 283. Thus, from May 19, cafes, nightclubs and some other establishments that have been closed since the beginning of the year, when the fifth wave of the epidemic covered the country, will resume work. Against this background, we can count on the fact that other large cities will gradually open up, and this, in turn, will support the demand for precious metals.

The long-term trend remains upward. Last Monday, the bidders tested a strong support level of 22.20, which was held, after which the price of the XAG/USD pair rose to the resistance level of 23.25. If this level is broken out, the upward trend will continue with a target at 24.25.

The mid-term trend is downward. As part of the decline last week, the quotes reached the target zone 2 (23.14–22.95). This week, the "bears" tried to break it, but the price returned to the area of 23.14–22.95. In case of consolidation above the range, the upward correction will continue with a target at the trend boundary of 24.06–23.89.

Resistance levels: 23.25, 24.25, 26.1 | Support levels: 22.20, 21.45

 

[SOLIDECN]

On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) formed, and a local correction developed as the wave 2 of (3). Now, the wave c of 2 has formed, within which the fifth wave of the lower level (v) of c of 2 has developed.

If the assumption is correct, the XAGUSD pair will move to the area of 24.12 - 26.2. In this scenario, critical stop loss level is 21.4.

 

[SOLIDECN]

The precious metal quotes show a local downward trend, trading around 21.5.

The key factor that led to the global sell-off in commodity markets was the US Federal Reserve's inflation forecast for April, which suggests a decline to 8.1% from 8.5% a month earlier. The main US statistics on the dynamics of consumer prices will be published today at 14:30 (GMT+2). Adjusting the interest rate to 1.00% could not have had such an early effect, and there are no prerequisites for reducing real inflation now: oil quotes are held above 100 dollars per barrel, contributing to fuel price growth, which increases the cost of delivering goods and increases their final cost. Thus, the key factors of inflation, such as fuel and food prices, are rising, but the regulator insists that inflation should come down. Uncertainty in the market forces traders to get rid of their assets in the stock market and commodity market.

A serious outflow of investors from silver is also confirmed by data from the US Commodity Futures Trading Commission (CFTC), according to which, over the past week, the number of net speculative positions decreased to 28.1K from 35.4K a week earlier. Over the past three weeks, the number of positions has decreased from 46.5K to the current 28.1K for the first time since 2020.

The price left the limits of the rising global channel with dynamic boundaries at 26.50–22.00, breaking the support line yesterday. Technical indicators reversed and gave a sell signal: the range of EMA fluctuations on the Alligator indicator actively expands downwards, and the histogram of the AO oscillator forms downward bars in the sell zone.

Resistance levels: 22.15, 24.4 | Support levels: 21.17, 19.5​

 

[SOLIDECN]

On the daily chart, a downward correction of the higher level develops as the second wave (2), within which the wave C of (2) forms. Now, the third wave of the lower level iii of C has formed, and a local correction has started to develop as the fourth wave iv of C.

If the assumption is correct, after the end of the correction, the price will fall to the levels of 18.40–15.71. In this scenario, critical stop loss level is 23.25.

 

[SOLIDECN]

XAGUSD, silver prices are consolidating around 21.50

Silver prices show a slight decline during the Asian session, testing the level of 21.5 for a breakdown. The instrument managed to update the local highs of May 11 the day before; however, the "bulls" failed to consolidate on new levels, as a result of which XAGUSD returned to the opening levels. Pressure on the positions of the instrument was exerted by optimistic macroeconomic data from the USA.

Tuesday’s statistics on the dynamics of Retail Sales in the US was better than market expectations. In April, Retail Sales volumes slowed down from 1.4% to 0.9%, while analysts expected a decline to 0.7%. Retail Sales excluding Autos for the same period slowed down from 2.1% to 0.6%, which turned out to be twice as good as experts' forecasts. Retail Sales Control Group declined marginally from 1.1% to 1.0% in April, while forecasts suggested a sharp slowdown to 0.5%. Thus, sales figures do not yet reflect a dramatic slowdown in consumer activity within the country. This removes some of the risks from investors who are concerned about a possible slowdown in the pace of monetary tightening by the US Federal Reserve.

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of overbought instrument in the ultra-short term.

Resistance levels: 22, 22.4, 22.7, 23 | Support levels: 21.39, 21.12, 20.81, 20.39

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[SOLIDECN]

On the daily chart, a downward correction of the higher level develops as the second wave (2), within which the wave C of (2) forms. Now, the fourth wave of the lower level iv of C has formed, and the development of the fifth wave v of C has started, within which a local correction of the lower level is forming as the wave (iv) of v.

If the assumption is correct, after the end of the correction, the price will fall to the levels of 18.40–15.60. In this scenario, critical stop loss level is 23.20.

 

[SOLIDECN]

The escalation of the conflict in Ukraine, high rates of global inflation, and lower forecasts for the recovery of the economies of developed countries create obstacles for further upward dynamics in the XAGUSD pair. However, analysts predict a 5% increase in silver demand in 2022 due to further structural progress in industrial production, which is expected to reach another record level this year, and jewelry sales growth after the coronavirus pandemic. On the supply side, higher mine productivity is expected due to increased production capacity and increased production at existing mines, leading to a 3% increase in global supply in 2022.

Thus, it can be assumed that the fall in metal prices will be stopped when geopolitical tensions decrease and the US Federal Reserve rate stabilizes in a specific target range. Up to this point, the growth of XAGUSD quotes should be taken as a correction.

From the technical analysis position, silver is trading in a long-term downtrend, in which market participants reached the support level of 20.57. Then the RSI technical indicator signaled that the instrument was in the oversold zone, which led to the development of a correction, in which market participants tested the resistance level of 22.2. As long as this level is held by the "bears," further sales of the precious metal will be a priority. The target for short positions will be the May low. If 22.2 is broken upwards and the consolidation above, we should expect the quotes to rise to the next resistance level of 24.25.

As part of the medium-term downtrend, market participants reached the target zone 3 (21.24–21.05) but failed to consolidate below it, after which a correction began, in which market participants tested the key resistance of the trend at 22.32–22.15. Currently, the zone is holding, which signals the possibility of new sales with the target at the May low of around 20.50.

Resistance levels: 22.20, 24.25 | Support levels: 20.57, 19.61​