- Silver continues to trade heavy amid dollar strength
- Reversal bar yesterday likely to lead next leg lower
- Support doesn’t arrive until the 16/15.80 area
The strong bid in the US dollar continues to weigh heavily on the price of silver; the correlation between the two sits at an extremely negative -93% on a monthly basis. Moving away from this relationship, silver sits in the middle of an air pocket we’ve been discussing between the low-17s and 16/15.80 support. We will reside in the bear camp until at least support is met, barring any major upside move which allows the precious metal to overcome resistance above 17.
Yesterday, silver put in a bearish reversal bar, which leads us to conclude that we should soon see another downdraft after a rejection occurred at a previous small swing low around 16.90. Watch for a break below 16.45, as this will constitute another lower low following the early week reprieve. Also, keep an eye on gold as it approaches important support in the 1190/1200 zone (October ’15 high, May low).
Tomorrow is the Thanksgiving holiday in the U.S., which means from today through Friday markets will be in thin holiday trading mode. Keep this in mind as liquidity gaps could arise in the absence of full market participation.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinonFX.