During early trading on Wednesday, the silver market experienced a significant downturn due to the strengthening of the US dollar. This surge in the dollar exerted downward pressure on silver futures, leading to a chaotic situation. Currently, it appears that the market may test the 61.8% Fibonacci level, but with time, there is a possibility of finding some support. However, failing to hold the 61.8% Fibonacci level could continue the downward trend, placing the $22 level at risk. If prices fall below $22, it could trigger a wave of selling pressure, potentially driving silver down to $20.
It is crucial to note that the US Dollar Index often exhibits a negative correlation with the silver market. Therefore, close attention must be paid to developments in the US dollar. Although this correlation does not always hold true, it generally suggests that the two tend to move in opposite directions over the long term. As long as the US dollar remains strong, it will likely continue to negatively affect the overall performance of silver.
Silver's role as an industrial metal also plays a significant part in its market dynamics. With this in mind, the assessment of value becomes essential. The question arises: Where can value be found, in the US dollar or in silver? Although it may be too early to determine, recent market conditions indicate a resurgence of fear, with central banks worldwide adopting a cautious stance. Consequently, if interest rates begin to rise sharply again, as observed during the day, the outlook for precious metals, including silver, could be challenging.
Waiting for a Decisive Movement
- Expectations suggest that the silver market will witness heightened volatility in the coming days.
- However, clarity may emerge sooner rather than later. Caution is advised when determining position sizing, as silver has the potential to exhibit extreme price movements.
- At present, there is no compelling reason to believe that the market will not reach a critical juncture and subsequently undergo a significant shift.
In the end, silver faced a significant decline in early trading as the US dollar gained strength, applying downward pressure to the market. The 61.8% Fibonacci level is likely to be tested, and the market's ability to find support in this range will be crucial. Failing to hold this level may lead to further declines, potentially endangering the $22 threshold. It is important to monitor the relationship between the US dollar and silver, as well as the industrial demand for silver. Additionally, heightened volatility is expected, urging cautious position sizing. As the market approaches a pivotal moment, a decisive movement with substantial implications may soon occur.
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