Silver bulls testing dynamic trend-line resistances

Silver was trading lower on Thursday vs the greenback in volatile month-end trade. At the time of writing, XAG/USD is down some 0.42% near $23.93 and has travelled between a low of $23.80 and $24.21 so far. 

The US dollar has made a round trip on both European inflation data coming in hot and end-of-month flows that seemed to have supported the greenback in the US session. 

The DXY index dropped to a low of 92.403 in London trade, its lowest level since Aug. 6 but is still up nearly 0.5% for the month.

Ever since the Jackson Hole, there has been a renewed focus on the European Central Bank and the convergence between it and the Fed. 

On Friday, at the Jackson Hole, ECB’s Philip Lane was basically promising to calibrate the QE program to financial conditions BOTH in an upwards and in a downwards direction.

This message has been perceived as hawkish and means that the recent new all-time lows seen in EUR real rates could be used as an argument to tone down PEPP-purchases, potentially as soon as September.

This meant that inflationary pressures in the Euro Area were the focus this week.

On Tuesday, the flash CPI estimate for August coming out hotter than expected, (3% vs 2.5% exp and 2.2% prior), sinking the DXY and gave some very temporary relief to commodities.

However, silver continued to bleed out from dynamic hourly resistance nevertheless, ending the day in the same disorderly fashion we have seen all month in the precious metals markets. 

Focus now shifts back to the US calendar this week and the US jobs market particularly. 

TD Securities have expectations for a disappointing jobs number this week which ''helps make the case for a December timeline.''

''Notwithstanding, QE portfolio effects may continue to weigh on the complex throughout the duration of tapering, as slowing money supply growth dents the demand for all collectables, including retail appetite for bullion and coins,' the analysts said.

''This should particularly dent demand for silver, particularly as industrial growth is set to slow further, and helps to explain silver's underperformance in the recent month,'' the analysts at TDS argued.

Silver technical analysis

Considering the potential convergence between the Fed and the ECB, a disappointment in the jobs data this week opens risks of a breakout to the downside in the greenback.

This would be expected to equate to a scenario well above daily trendline resistance for silver:

In this regard, technically, the focus would be on 25.60 and then 27.00 ahead of the May-June resistance in the 28 handle.

First, the bulls need to break the dynamic resistances as illustrated above. 

On the downside, 23.00 guards Aug lows of 22.10.