Silver Under Pressure

It’s been another tough week for silver so far. The metal came under heavy selling pressure over Monday and Tuesday and while the market is holding up for now, prices have already cooled from highs seen earlier in the session, suggesting risks of a fresh downside push today. The rally in USD has been a major headwind for silver prices, as has the pull back in stocks. With fresh fears over the health of the Chinese economy, the industrial demand outlook has cooled and is taking silver prices lower near-term.

US CPI Tomorrow

Looking ahead today, with very little on the calendar, flows are likely to remain linked to USD and broader risk sentiment. The main focus for markets will of course be tomorrow’s US CPI reading. With hawkish risks still seen, any fresh upwards USD move on the back of the data will be heavily bearish for silver. On the other hand, if we see any strong downside surprise tomorrow this will likely reinforce the view that the Fed will remain on hold next month, allowing silver to rebound as USD heads lower.

Treasury Auction in Focus

Focus will also be on today’s 10Y US treasury auction. Yesterday’s 3Y auction saw USD coming off a little as the market eventually settled on a lower yield than was seen in pre-auction trading. This was taken as a positive sign and should we see a similar outcome today this should help USD cool further ahead of tomorrow’s data.

Technical Views

Silver

The reversal lower in silver has seen the market breaking under the 24.0073 level. Price is now quickly approaching the 22.3205 level and the bull channel lows. This is a key area for the market which, if broken, opens the way for a much deeper move down towards the 20.6398 level next. Bulls will need to see price quickly back above 24.0073 to alleviate near-term bearishness.