Silver bulls hang on for dear life to test counter trendline resistance
|- Silver sinking with gold as the US dollar bulls reemerge.
- XAG/USD traders are anxious ahead of US elections and news over stimulus as the wave of COVID-19 swells.
The price of silver is trading at $24.2211 and down some 0.16% at the time of writing having travelled between a high of $24.3095 and $23.5768.
The US dollar is moving higher, measured by the DXY, and the greenback is some 0.46% up vs a basket of currencies on Thursday on the approach to the psychological 94 figure.
US election and stimulus uncertainty is driving the precious metals and the dollar on a day-day basis, from headline to headline.
''During this lull in the prevailing macro tailwinds, we note that the bar for a CTA liquidation is growing thinner,'' analysts at TD Securities explained, referring to gold, silver's sister metal.
For gold prices, the analysts explained, 'while we don't expect a deeper consolidation to take place, a close below $1870/oz would catalyze a selling program which could potentially mark peak capitulation as even systematic trend followers would be set to liquidate some gold length.''
In such an event, silver prices would be expected to follow suit and it could all boil down to how the markets continue to react to a lack of stimulus and the US elections.
It is inevitable, that no matter which party wins the elections, the US is going to require a large scale fiscal stimulus package and that is ultimately bearish for the US dollar and bullish precious metals.
''We should not forget that gold's consolidation was largely catalyzed by a momentum-crash, reflecting a bloated positioning slate and narrow risk spectrum, but that ultimately the macro factors that have driven investors to seek the yellow metal's warm embrace will keep investment capital flowing into gold well into next year,'' the analysts at TD Securities argued.
However, in the near term, the greenback is holding its own while there are still no signs of a deal to be down in Congress despite the growing swell of the second coronavirus wave on US soil.
US President Donald Trump on Thursday said he is willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in the US Congress, but the idea was shot down by his fellow Republican, Senate Majority LeaderMitch McConnell.
This has boosted the greenback on the session and is a weight on precious metals as the talks appear unlikely to produce an agreement before the November 3rd election.
Trump told the Fox BusinessNetwork that he has directed Treasury Secretary Steven Mnuchin to put forward a bigger stimulus offer, with additional money to help workers. "We like the stimulus, we want stimulus and we think we should have stimulus," Trump said.
However, the stock market is not necessarily buying it and the S&P 500 is down dome 0.36% at the time of writing.
Instead, investors are well aware that while a higher amount was under discussion, nearly all Senate Republicans favour a much smaller $500 billion aid bill in response to the pandemic.
Silver levels and DXY technical analysis
What is worth noting is the price action on the DXY.
A reverse head & shoulders pattern is a bullish scenario which could lead to further losses in the precious metals in the near term:
For XAU/USD, it's now a matter of life or death at the counter trendline resistance:
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