Silver prices silver futures SLU22, -1.04% have had a drastic haircut, falling hard below $32.50 and through support at $33 during Thursday’s European trade. That pullback comes on the heels of a short-lived effort to push the 10-day rally past the critical resistance zone of $33.00. The recent correction comes as the US Dollar struggles to find its footing. This is particularly the case with exciting advances in the trade talks between the U.S. and Japan.
The silver market, despite the downward pressure afforded by the recent dollar rally, is still holding onto a bullish near-term outlook. Futures recovered from an even larger decline on analyst suggestions that the downside is capped amid ongoing uncertainty over a possible US-China tariff war. As traders watch these developments closely, silver continues to stay above its 20-day Exponential Moving Average (EMA), currently located at $32.28.
Silver’s Recent Performance
On Thursday, silver declined sharply towards $32.50 after going up like a light rocket on Wednesday and couldn’t hold strength above the $33.00 mark. The drop represents a big change from the recent upward trend that lasted, somewhat terror-inducingly, for 10 days. Even with this adverse movement, the silver market continues to show strength, still holding above the key technical pivot point at $32.28.
The recent dip in silver prices has been due in large part to the recent moves in the US Dollar. Look no further, the dollar is king! It’s attracting buyers as the US Dollar Index (DXY) nears its three-year low of 99.00. The Federal Reserve should continue to encourage a hawkish monetary policy tone. In the short term, this approach mainly affects the market value of the US Dollar against other currencies.
Traders are watching closely international trade relations. They are especially on guard given that US President Donald Trump recently raised expectations about advances in trade negotiations with Japan.
“A Great Honour to have just met with the Japanese Delegation on Trade. Big Progress!” – US President Donald Trump
This statement highlights the cautious but considerable optimism for the future of US-Japan trade relations and suggests possible repercussions for various commodity markets, silver included.
Future Prospects for Silver
Analysts are bullish about silver’s ability to return to highs hit earlier this month. Most of these expect silver to at least go after that high at $34.87 from October 22. It first needs to clear the April 16 peak of $33.12 to reach that level. If this breakout is able to hold, further targets above the October high would be an over-decade high of $35.50.
Traders are equally wary of downside risks. If silver can’t hold above the April 14 low of $31.74, the market may be in for further downside. On the downside, look for important support at the April 11 low of $30.90 and at the round number at $30.00.
Market sentiment is still highly guarded as traders attempt to weave through these crucial inflection points, weighing bullish upside prospects against growing bearish dangers.
Impact of External Factors
The silver market remains highly sensitive to external factors, particularly fluctuations in the US Dollar’s value against six major currencies as tracked by the US Dollar Index (DXY). The index’s recent fluctuations have caused a wave of uncertainty and volatility throughout society as well, shaking commodity prices from gold to silver.
The still-raging US-China tariff war hasn’t helped market conditions, either. The continued uncertainty about trade relations between these two economic superpowers provides a tall obstacle for silver prices. This duality constrains the upside for meaningful increases. Traders are focused intently on the ongoing trade talks. Interestingly, they understand that, depending on how things escalated or were resolved, it would significantly impact silver prices and the overall market.
Conversations are still very much ongoing, and market players are responding to changing economic signals. Silver shines as a key inflation hedge and currency debasement hedge for investors.