Markets Rebound After Rate Cuts, Stimulus
Global markets have moved higher on Friday, as governments and central banks have intervened with massive stimulus packages in order to stabilize the volatile financial markets. On Wednesday, President Trump signed into law a massive stimulus package that had been quickly approved by Congress. The package, worth close to a trillion dollars includes direct payments, deferred payments and tax breaks. The move is aimed at shoring up the U.S. economy, which analysts fear could be headed towards a recession.
Major central banks have mobilized to combat the financial turmoil caused by COVID-19 outbreak. The Federal Reserve has slashed interest rates to near zero and also announced a huge bond-buying campaign. Across the pond, the ECB announced a 750 billion euro asset purchase package. The Pandemic Emergency Purchase Program (PEPP) will last until the end of 2020. On Thursday, the Bank of England trimmed rates from 0.25% to 0.10%, a record low. This move comes just one week after an emergency rate cut of 50 basis points. The bank will also buy an extra 200 billion pounds in government and corporate bonds. These massive bond purchases by the central banks are aimed at improving economic conditions, which have badly deteriorated due to the outbreak, especially with crippling travel restrictions through much of the world.
The cautious optimism in the financial markets has helped boost silver, although the metal is down 14.8 percent this week. For now, silver is keeping its head above the critical $12 level, which has been tested during the week.
Silver Technical Analysis
The crucial 12.00 level remains an immediate resistance line. Above, there is resistance at 13.00. If that level is broken, the market will next be looking at 15.00. On the downside, if silver drops into the mid-11 range, we could be headed much lower, as the next major support level is at the symbolic 10.00 level.