FUNDAMENTAL OVERVIEW
Silver erased most of its monthly gains in the final part of last week as real yields surged and we got broad risk-off flows heading into the weekend risk after some hawkish Trump’s remarks on Iran. The divergence with gold we’ve seen in the past couple of weeks has been now corrected.
Overall, the fundamentals haven’t changed at all. The main problem for silver and gold remains the Fed. Although the central bank is still keeping an easing bias, we are now approaching a point where the Fed is likely to drop it entirely. The market is now pricing in a 50% chance of a rate hike by year-end.
If nothing changes before the June meeting, we might be in for a hawkish surprise as inflation continues to run hot and the US data remains resilient. In such a case, silver will likely break the March lows.
In the short-term, a resolution and the reopening of the Strait will likely support silver on falling oil prices and increased rate cut bets. But if the Strait remains closed for longer and oil prices stay elevated, the risk of the Fed turning hawkish anyway increases.
SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that silver erased most of its monthly gains. From a risk management perspective, the buyers will have a better risk to reward setup around the major upward trendline to position for a rally into the 96.00 level. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the next major trendline around the 60.00 handle.
SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the bearish momentum increased as the price broke below the minor upward trendline and then the support as more sellers piled in. There’s not much we can glean from this timeframe as we don’t have clear levels where to lean on except the major trendline around the 70.00 handle.
SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor counter-trendline defining the current pullback. Aggressive buyers will likely lean on the trendline with a defined risk below it to keep pushing into the 83.00 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 70.00 handle next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday, we have the FOMC meeting minutes. On Thursday, we get the latest US Jobless Claims figures and the US Flash PMIs.
