During Tuesday's trading session, silver exhibited a relatively subdued performance, maintaining support at lower levels while encountering significant resistance above, before rallying yet again. The $25 mark stands out as a key psychological barrier, having previously acted as a point of selling pressure. Additionally, the $25.50 level looms overhead, suggesting that a minor pullback might be necessary to find more buyers to push this market higher. Notably, the $24 level also provides support, transitioning from its former role as resistance. This shift is underscored by the emergence of a "golden cross," with the 50-Day EMA crossing above the 200-Day EMA.
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In this context, the strategy seems to be one of identifying value and capitalizing on it via pullbacks. It's important to remember that silver's price is closely linked to interest rate movements, particularly in the United States. A downward trend in the 10-year yield could be beneficial for silver prices. Concurrently, the US dollar presents a significant inverse correlation, influencing silver's trajectory. Moreover, silver's dual identity as both a precious and industrial metal means that any economic downturn could adversely impact its demand.
Market Still Sees Momentum Overall
- The market has recently seen a sharp upward trajectory, indicating that there are numerous buyers ready to engage in dips in value.
- Such pullbacks are likely to attract considerable attention.
- A breakthrough above the $25.50 level could propel silver into a significant upward momentum trade. That being said, it is likely that you already have experienced this more than once trading silver.
Looking at the move that we have seen ahead of Tuesday's session, there's a clear indication of strong momentum. It seems likely that traders who have remained on the sidelines may soon seek to capitalize on what appears to be a decidedly bullish market. However, the Federal Reserve's stance on monetary policy, whether it maintains tightness or eases, remains a critical factor that could temper the market's ascent. In any case, volatility is to be expected in the silver market, but that is hardly a departure from the norm for these trades. In other words, this is going to be a noisy market. I know for anyone that has traded this market will already know that the silver contract can be volatile, and therefore you need to make sure that the position size that you use is reasonable, especially as the market is trying to “guess” what the Fed is going to do next.
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