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MENAFN- Daily Forex)
Silver has been all over the place on Friday. I think there's a little bit of a hint in the closing candlestick for the session. We initially rallied to break above the $42 level, but we gave those gains back pretty quickly as traders I think are now starting to think about the global economy and with the horrible US jobs number, whether or not silver demand might drop. At least that's what I suspect.
All things being equal, is a market that was a little overdone anyway, so a little bit of a pullback would have always made sense. Even if the jobs number was essentially where we were expected to be, I would still think that a pullback is fairly likely sooner or later. At the very least, we are looking at a situation where the market probably needs to go sideways in order to work off some of the excess froth.
On a drop, I think that the $40 level should be significant support as it was previous resistance. Ultimately, this is a market that will continue to be very noisy. We are in the midst of an up trending channel and close to the top of it. So that also gives you another reason to think that perhaps we will pull back.
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The US dollar, if it starts to strengthen based on a fear-based trade, and that's a very real possibility, that will be toxic for silver. We'll just have to wait and see if that plays out. I mean, we're still very much in an uptrend, but right now we have a lot of questions to ask about whether or not this momentum can keep up because silver isn't quite like gold in the sense that it's a lot more sensitive to industrial demand than gold will ever be. So interestingly enough, this was an area I expected consolidation. We're still doing that, but the way we closed during the trading session looks pretty poor.
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