Silver Video 08.05.20.
Silver Gets Back Below 50 EMA As U.S. Dollar Gains Ground After Employment Data
Silver tested the 50 EMA level at $15.40 and was trying to settle above $15.50 but better-than-expected U.S. Non Farm Payrolls and Unemployment Rate data pushed it back below the previous resistance as the reports provided support for the U.S. dollar.
U.S. dollar strength is a bearish catalyst for silver as it makes silver more expensive for buyers who have other currencies.
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently close to the 100 level after trending towards 99.5 before the release of the U.S. employment data.
Gold is losing ground after the employment reports but is still above $1700 per ounce which is a bullish sign for the whole precious metal segment.
I’d note that the spread between spot gold prices and futures gold prices has significantly decreased over the recent weeks, signaling the normalization of the marketplace.
The same is true for silver which also had a significant spread between spot prices and futures prices at the acute phase of the coronavirus crisis.
As I wrote yesterday, silver’s move above $15.00 paved the way for a test of the 50 EMA level at $15.40. Silver enjoyed robust upside momentum and breached the $15.40 level to the upside.
Unfortunately for silver bulls, the U.S. employment data provided material support for the U.S. dollar and put pressure on silver. Due to these developments, silver returned back below the 50 EMA level.
In case silver stays below the 50 EMA during today’s trading session, its voyage above $15.50 would be counted as a fake breakout, which is unpleasant but not decisive as silver bulls will likely have another chance to take silver closer to April highs.
If silver manages to settle above $15.50 despite the current setback, it will likely develop material upside momentum and quickly move to test the April highs at $15.80.
In this scenario, silver will have a good chance to get to pre-crisis levels at $16.50.
On the support side, the nearest material support for silver is located at $14.60. I would not count much on support near $15.00 although silver may still pause there in case of a downside move.
If the support at $14.60 is breached to the downside, silver will develop robust downside momentum and its next goal will be the support area near $14.00.