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  • Silver extends correction to daily and critical resistance.
  • All eyes are on the US elections and risk of a contested result.

The price of silver s trading at $24.03 at the time of writing and up some 1.63% despite a solid US dollar which has been gaining ground since late October in the run-up to the US election tomorrow. 

After weeks of concerns about a possible contested election, the dollar has benefitted from a combination of risk-off flows as well as prospects of a delayed result and prolonged fiscal stimulus as a consequence.

Apart from that, there have also been glimpses of hope in the US economic recovery in data beating expectations. 

From today, the October Institute for Supply Management manufacturing Purchasing Managers’ Index headline saw the sixth straight month of growth at 59.3%, the highest since September 2018, versus 55.4% in September. 

“This figure indicates expansion in the overall economy for the sixth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth,” ISM Chair of manufacturing business Timothy Fiore said.

Meanwhile, the coronavirus updates were a stark contrast on Sunday and the US reported 81,500 COVID-19 cases, up 34% from Oct. 25.

”The seven-day average doubled in under two weeks to the highest since mid-July, and hospitalizations were rising in nearly every state, Pantheon Macroeconomics’ chief economist Ian Shepherdson said in a note to clients Monday.

‘The high and rising trend in positivity, suggests either that transmission from asymptomatic people is rising, and/or that people with symptoms are not quarantining properly, and/or that people who have been in contact with infected people are not self-isolating,’ the economist said,” as reposted by Reuters. 

Meanwhile, it’s election week, but it’s also Fed week and BoE week and there is a particular focus on central banks again as the virus spreads throughout Europe, forcing lockdowns and requiring more stimulus for the foreseeable future. 

No new policy announcements are expected at this week’s FOMC meeting, although the Fed will likely ease by extending weighted-average maturity of purchases in December.

As for the Bank of England, there are expectations of a £120bn boost to QE in order to keep the program running at the current £60bn/quarter pace through to mid-2021.

Meanwhile, analysts at TD Securities note that it may not take much to catalyze a positioning squeeze in the precious metals, but argue that as uncertainty fades going forward, we expect a that investment demand will continue to grow in the months ahead.

This, they said, will lift gold prices as real rates resume their downward trajectory. Silver would be expected to follow suit. 

Silver levels

From a technical analysis, the price has extended to the upside in the correction of the daily bearish impulse.

Bulls now test the bear’s commitments an with the extreme of a 78.6% Fibonacci retracement meeting prior daily support. 

The price would be expected to be resisted at this juncture and on consecutive closes below, a downside extension of the 25 level sell-off is a probability. 

The following is the prior day’s analysis and despite a slightly extended correction, the expectations of a downside continuation are still valid. 

Silver Price Analysis: XAG/USD bears setting sights on downside extension