Analys från DailyFX
Silver Prices Remain Bearish Below $14.62
Talking Points
- Silver remains out of favour and capped by the December high of $14.62.
- Silver to SP 500 ratio points towards further Silver price losses
- Data on tap in today’s session is U.S. house price index (0.5% MoM expected), Existing home sales (-0.2% MoM expected), and Richmond Fed Mfg. Index (-1 expected).
Silver remains out of favour and capped by the December high of $14.62. A break to this level may trigger a push towards to $15 and $15.50. This could be scalped on a break to $14.62, but the base case is for the medium trend to remain bearish and capped by $14.62. As long as $14.62 is capping price I am expecting a decline to $13.59 and $13.17.
The reason for holding this view is the long-term bullish trend of the US Dollar and the preference of investors to hold equities over the precious metal. This can be seen in the Silver to SP 500 ratio (see below).
At the lows of 2011 one contract of the SP 500 was worth 25.59Troy Ounce of silver. While today an investor would need 141 Troy Ounces to buy the same SP 500 contract. This highlights that the SP 500 has been gaining in value while silver prices have dropped. It also points out that the market is not afraid of inflation or geopolitical worries, which are two reasons for traders to buy silver. In regards to the former, the current decline of Crude oil prices will probably ensure that the world economy experiences low inflation in the next 2 years. Geopolitical risks have declined as the western super-powers are now working closer with the Russians to combat the IS.
Data on tap in today’s session is U.S. house price index (0.5% MoM expected), Existing home sales (-0.2% MoM expected), and Richmond Fed Manu. Index (-1 expected). I don’t expect these indicator to change the overall trend of Silver prices as none are key for the Federal Reserve. For a complete list of economic indicators please see our economic calendar.
Silver To SP 500 Ratio
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
— Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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