Silver (XAG) Forecast: 10-Year Yield Reversal Puts $60.84 Pivot Back in Play

Silver’s Break of Tuesday’s Low Didn’t Stick

Spot Silver (XAGUSD) took out Tuesday’s low Thursday and the sellers who ran it there couldn’t keep it down. The 10-Year yield turned lower off a fresh high and silver was right back over its long-term 50% retracement late in the session.

Calling it a bottom is premature. The dollar hasn’t let up and gold is steady at best, so silver is doing this mostly on its own. What buyers have is a level that survived a stop-run and a bond market that finally gave a little.

At 17:39 GMT, Spot Silver is trading at $60.96, up $0.55 or +0.92%. It traded from $59.96 to $61.44.

Daily Spot Silver (XAGUSD) Technical Analysis

Spot Silver is working on a closing price reversal bottom Thursday after posting a lower low at $59.96 and recovering above Wednesday’s close. The pattern will need a higher close and follow-through buying on Friday to be confirmed.

The main trend remains down according to the daily swing chart. A trade through the lower top at $67.55 will change the main trend to up. A sustained break through Thursday’s low at $59.96 would signal a resumption of the downtrend.

The long-term 50% retracement of the all-time high is $60.84. Silver broke below it during the session but recovered above the level late Thursday.

The first resistance is $61.04. The minor top at $61.73 is the more important near-term trigger. Taking it out would change the minor trend to up and shift momentum higher. The 50-day moving average at $63.99 remains the larger resistance and trend indicator above the market.

The 10-Year Turned Lower and Silver Got Some Air

The 10-Year U.S. Treasury yield ran up to 5.342% Thursday, the highest since April 2002, and couldn’t hold it. By late afternoon it was back near 5.22%, a decent chunk taken out of the day’s move. Silver’s climb back over the retracement came right as the yield was backing off, late in the session.

Silver had been missing a pullback like this. The short end already had lower October hike odds to work with after PCE, but the long end shrugged the report off, and nothing in metals was going to recover with the 10-Year and 30-Year still making new highs.

I’m not ready to say the bond sellers are done. The 10-Year climbed roughly 50 basis points in 18 sessions, and Thursday’s drop may be nothing more than profit-taking on a fast run. Oil, deficits, supply and inflation risk are all still parked in the long end.

Silver Did This With the Dollar Still Near Its High

Give silver credit for one thing. It got back over the long-term retracement with the dollar giving it nothing. The U.S. Dollar Index pushed to 102.19 Thursday and was still near 102.00 late in the session, and it’s well over its 50-day moving average. The dollar never cracked.

So the buying came off the yield reversal and the level itself. Holding without help says something good about the retracement. It also says plenty about the ceiling. Dollar buyers are still there and silver’s own 50-day moving average is a long way up the chart.

Gold isn’t pulling silver along either. Spot Gold has gone flat since PCE and is still stuck under the resistance it lost earlier in the week. Silver is trying to turn by itself while the rest of the metals sit under a firm dollar.

October Lost Its Urgency and Silver Can Use That

The Fed side gives silver a little room. CME FedWatch has an October quarter-point hike down to 32.7%. A week ago that number was 68.6%, and the softer PCE report is what pushed traders toward a pause.

Another hike hasn’t come off the market’s calendar, and oil and inflation are still in the trade. What’s gone is the scramble over October. With that pressure easing on the same day the long end finally backed off its high, the bond market isn’t leaning on silver nearly as hard as it was earlier in the week.

What to Watch

Friday’s Non-Farm Payrolls report is the next shot at yields and the dollar, and silver walks into it having survived a stop-run under Tuesday’s low. The 10-Year turning lower off its high is what gave the recovery room Thursday, with the dollar still holding near its top.

The main trend is still down on the swing chart. Silver dug down to Thursday’s low and was back over $60.84 by late afternoon, the level buyers have to keep under them. At 17:39 GMT it’s trading just below $61.04, the first offer buyers have to chew through. The minor top at $61.73 is the trigger that turns the minor trend up and gives this recovery some structure going into the jobs number.

More Information in our Economic Calendar.