Silver Price Outlook:
- Silver prices are holding onto a multi-month descending trendline forward of the September Fed assembly tomorrow.
- A transfer above the trendline will increase the chance of a return to the September excessive, whereas a drop will elevate the opportunity of a return to the yearly low.
- Recent changes in sentiment counsel that silver costs have a blended bias.
Waiting on Powell
Like most different property this week, silver costs have seen subdued value motion within the run-up to the September Fed assembly. Questions stay over whether or not or not Fed Chair Jerome Powell and the FOMC will ship a 75-bps or a 100-bps fee hike, although each situations will possible catalyze a big market response of their wake. If the Fed solely delivers 75-bps, then there’s a likelihood for a short-term restoration by silver costs; if the Fed delivers 100-bps, then silver costs may rapidly hunch. Either manner, silver costs are clinging to a multi-month descending trendline forward of the September Fed assembly, and the decision round this key technical space will information buying and selling course for the rest of this week.
Recommended by Christopher Vecchio, CFA
Trading Forex News: The Strategy
Silver Prices and Volatility Relationship Strengthens
Both gold and silver are valuable metals that usually take pleasure in a protected haven attraction throughout instances of uncertainty in monetary markets. While different asset courses don’t like elevated volatility (signaling better uncertainty round money flows, dividends, coupon funds, and so forth.), valuable metals have a tendency to profit from durations of upper volatility as uncertainty will increase silver’s protected haven attraction. The current enhance in US inventory market volatility could also be serving to silver costs keep off a extra vital decline within the near-term.
VIX (US S&P 500 VOLATILITY) versus Silver Price TECHNICAL ANALYSIS: DAILY PRICE CHART (September 2021 to September 2022) (CHART 1)
US inventory market volatility (as measured by the US S&P 500 volatility index, VIX, which tracks the inventory market’s expectation of volatility primarily based on S&P 500 index choices) was buying and selling at 26.51 on the time this report was written. The 5-day correlation between the VIX and silver costs is +0.50 and the 20-day correlation is +0.30. One week in the past, on September 13, the 5-day correlation was -0.45 and the 20-day correlation was -0.05.
SILVER PRICE TECHNICAL ANALYSIS: DAILY CHART (September 2021 to September 2022) (CHART 2)
After setting a recent yearly low at 17.5590 on the primary day of September, silver costs have rebounded rapidly to the descending trendline from the April and August swing highs. Clinging to the downtrend over the previous week, silver costs are nonetheless beneath a cluster of necessary Fibonacci ranges – the 23.6% retracement of the 2011 excessive/2020 low vary; and the 50% retracement of the 2020 low/2021 excessive vary – whereas holding above the 61.8% retracement of the 2020 low/2021 excessive vary.
Momentum has improved in current days. Silver costs are above their every day 5-, 8-, 13-, and 21-EMA envelope, which is in bullish sequential order. Daily MACD is nearing a bullish crossover by its sign line, whereas every day Slow Stochastics are holding simply beneath overbought territory. A rally after the September Fed assembly may see silver costs return to their month-to-month excessive at 20.0140; weak point within the FOMC’s wake may produce a drop beneath the multi-month descending trendline, paving the trail for a return to the yearly low at 17.5590.
SILVER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (November 2010 to September 2022) (CHART 3)
Despite the current rebound, there may be an argument to be made that the longer-term outlook stays bearish. With silver costs having damaged the 61.8% Fibonacci retracement of the 2020 low/2021 excessive vary at 18.7064, it stays the case that the bull run in 2020 and 2021 is completed. Silver costs are nonetheless beneath their weekly 4-, 8-, and 13-EMAs, and the EMA envelope is aligned in bearish sequential order. Weekly MACD has solely simply began to development larger however stays beneath its sign line, whereas weekly Slow Stochastics are nonetheless beneath their median line. From the weekly perspective, because it stands now, silver costs stay in a ‘promote the rally’ mode.
IG CLIENT SENTIMENT INDEX: SILVER PRICE FORECAST (September 20, 2022) (CHART 4)
Silver: Retail dealer knowledge reveals 84.74% of merchants are net-long with the ratio of merchants lengthy to quick at 5.55 to 1. The variety of merchants net-long is 1.00% larger than yesterday and 5.50% decrease from final week, whereas the variety of merchants net-short is 0.91% decrease than yesterday and 64.00% larger from final week.
We usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests Silver costs could proceed to fall.
Positioning is extra net-long than yesterday however much less net-long from final week. The mixture of present sentiment and up to date adjustments offers us an additional blended Silver buying and selling bias.
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— Written by Christopher Vecchio, CFA, Senior Strategist