Silver Got a Dollar and Yield Break, but It Is Still Fighting the Midpoint
Spot Silver (XAGUSD) is higher late Tuesday after the dollar and Treasury yields backed away from Monday’s extremes. The move gave buyers room to push price back above the long-term 50% level, but it has not changed the bigger problem. Silver is still under its 50-day moving average and inside a resistance area that sellers controlled last week.
The dollar and the long end of the Treasury curve did the work, and silver’s own supply-and-demand story had nothing to do with it.
At 18:12 GMT, spot silver is trading at $61.56, up $0.50 or +0.81%. It opened at $61.07, reached $61.71 and bottomed at $60.28.
The Dollar Pulled Back but Is Still Above Its Major Averages
The U.S. Dollar Index fell to 101.807 Tuesday, down 0.29% on the session after reaching 102.535 on Monday. The euro did most of the pushing after French bond yields fell and took some of the pressure off the euro-zone debt trade.
That got the dollar lower for a day without breaking its uptrend.
The Dollar Index remains above its 50-day moving average at 99.960 and its 200-day moving average at 99.346. The dollar is resting after a sharp run, and nothing on the chart says it’s rolling over.
A weaker dollar let silver buyers come in, especially after Friday’s hard reversal. The Dollar Index is still sitting right around the 101.800 area, though, and silver is still trading against a firm dollar.
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See all Silver forecastsThe Long End Came Off the Highs and Silver Bounced With It
The 10-year Treasury yield fell to 5.262%, down 4.5 basis points after reaching 5.349% Monday, the highest level since 2002. The 30-year slipped to 5.632% off its Monday high, and the two-year moved lower as well.
The drop in yields followed lower crude prices. Brent fell toward $99 a barrel and WTI traded near $88 as Middle East exports held up and the G7 emergency stockpile release eased the immediate oil-supply concern.
That gave bond sellers a reason to step back. Silver buyers took the opening.
The key word is step back. The 10-year and 30-year are still sitting near their highest levels in more than two decades, and the long end hasn’t stopped making higher highs. Silver gets breathing room on days like this and that’s about it.
December Is Still the Fed Problem for Silver
Friday’s weak Non-Farm Payrolls report knocked October hike odds down to about 22%, leaving the market with about an 80% chance of a hold at the October meeting.
December still carries an 86% probability of at least one hike by the December meeting. That keeps the rates trade alive even after one softer jobs report.
Wednesday’s Fed minutes are the next test. Traders want to know whether the September hike had broad support and how concerned policymakers were about the surge in long-term yields. Silver has spent the last several sessions taking its direction from that answer.
Short-dated yields have quieted down since the jobs report, but long-dated yields are still up near their highs. Tuesday’s bounce looks like a response to lower yields rather than the start of a new sustained rally.
Daily Spot Silver (XAGUSD) Technical Analysis
Spot silver is trading higher on Tuesday after holding above the long-term 50% level at $60.835. This is the key decision area on the daily chart. Traders are straddling the midpoint after Friday’s break below it and today’s recovery back above it.
The main trend is down according to the daily swing chart. A trade through the main top at $67.55 will change the main trend to up. A move through Friday’s low at $59.69 will signal a resumption of the downtrend.
The minor trend is down. A trade through the minor top at $62.09 will turn the minor trend up and show that buyers are doing more than defending the midpoint.
The first upside area is the short-term retracement zone at $61.04 to $62.98. Silver is trading inside the lower half of this area. Taking out $62.09 would put the upper level at $62.98 in play, followed by the 50-day moving average at $64.17.
Failure to hold the long-term 50% level at $60.835 would expose $59.69. Below it, the next swing-bottom support comes in at $56.56 and $54.78.
What to Watch
Wednesday’s Fed minutes are the next read for a silver market that’s been trading off the U.S. Dollar Index and long-term Treasury yields. Both dipped Tuesday and that was enough to lift spot silver back over the midpoint. Neither one has turned yet.
Spot silver bottomed at $60.28, got back above $60.835 and ran up to $61.71 late Tuesday, within 40 cents of $62.09. The bias is still to the downside while the main trend is down and spot silver remains below the 50-day moving average. The move back above the midpoint gives shorts a reason to be careful.
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