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Silver is attempting to hold onto the $27.00 support area as the shiny-metal appears much-stronger than gold and has taken the latest bout of US dollar strength in its stride. If silver continues to hold the $27.00 level it could be a strong sign that a meaningful price floor has already been established this month.
Gold hit the headlines on Tuesday after staging a $50.00 down move. Silver briefly lost the $27.00 handle, but quickly recovered and found strong buying demand on dips, while the yellow metal lingered below the $1,800 level.
The fundamentals for silver still look good at this stage, especially from the supply side. Recent data has revealed that a short squeeze in silver could cause real issues for many exchanges, as physical silver supply remains scarce.
Legal action against certain participants in online trading forums has stopped the wild volatility that engulfed the metal a few weeks, where the price of silver roared towards the $30.00 level. It must be said that silver volatility is notably muted and trading volumes have been coming down.
The release of the FOMC meeting minutes yesterday revealed that the Federal Reserve has no intention in reducing QE purchases any time soon. Policy members noted that the US economy is still not “where it needs to be”, which certainly suggests that the central banks ultra-loose fiscal policy is here to stay.
It will be particularly interesting to see if the price of silver holds-up if the greenback continues to strengthen. If this dynamic remains strong it bodes well for the price of silver when the US dollar eventually meets resistance.
Something else to consider is that the US dollar index is still entrenched in a deep bear trend. If we consider previous bear cycles in the US dollar, the ongoing move lower still looks like it has plenty of scope to run, which is bullish for silver.
According to the ActivTrader Market Sentiment tool traders still remain bullish towards silver, with sentiment sitting around 60 percent positive. I believe that this is not worrying, and that intraday traders may be on the correct side of the move. I would only have concerns if silver prices continued to fall, and sentiment rises.
Silver short-term Technical Analysis
The short-term technicals for silver show the metal is trapped in period of price consolidation. The Bollinger Band indicator on the four-hour time frame perfectly illustrates this.
Typically, when then bands start to narrow then an explosive directional move is coming. I believe that bulls may test $30.00 on a break above the bands, and $24.00 if a bearish break from the bands takes place.
Source by ActivTrader.
Silver Medium-term Technical Analysis
According to the daily time frame bulls need to clear the $30.00 level to really accelerate technical buying towards silver. This is due to the fact that a large, inverted head and shoulders pattern with an $8.00 upside projection has formed.
The weekly time frame continues to show a huge cup and handle pattern. If this bullish price pattern plays out to the upside it should cause a parabolic move towards $40.00 level, and possibly much higher.
Source by ActivTrader.
