Recently, Silver has been capitalizing on the market’s risk-off approach to trading as uncertainty runs rampant in both Europe and the US. Specifically, as the UK Brexit referendum and the US FOMC meeting inch closer, the market has been retreating to Gold and Silver. Consequently, the two metals have been recovering strongly as the important dates draw nearer. However, for Silver at least, recent gains could once again be dashed if the Fed follows through with its hawkish rhetoric.
Looking at the daily chart, below, a possible double top pattern is forming which could send Silver reeling. Much as it did last month, the metal is moving to test the 18.00 handle as uncertainty continues to mount.
Additionally, a final impulse wave is looking poised to begin on the H4 chart which could see last month’s high challenged prior to the Federal Funds Rate announcement.
Aside from the probable impulse wave, EMA activity is signaling that Silver still has the momentum to form a second peak. As seen on the daily chart, a recent crossover of the 12 and 20 day EMA’s is hinting that the metal still has some upside potential. Additionally, the 100 day EMA has taken a rather bullish upturn which could likewise help to see resistance at 18.00 tested.
Whilst Stochastics are relatively overbought, RSI readings remain neutral which means that Silver could still push through its current zone of resistance. In fact, the latest session’s slip has actually brought the H4 stochastic and RSI oscillators back into neutral territory. As a result, there is now scope for the commodity to take a shot at last month’s high before tumbling lower.
Putting the technicals aside, fundamental results will be vital this week in seeing the potential double top complete. Namely, the FOMC meeting will be pivotal as if the recent talk of a rate hike proves to be more than just talk. The swell of USD sentiment could easily see Silver plummet. When combined with the nascent double top formation, the downside potential for the metal could bring it as low as the 15.00 handle.
Ultimately, Silver’s fate remains as uncertain as the outcome of the Brexit referendum and the FOMC meeting. However, the still-forming double top pattern and other technical indicators could be giving a signal that the metal could be exposed to more downside potential than other commodities. Consequently, keep a keen eye on this week’s FOMC meeting as it could be the push that sends silver all the way back to the 15.00 handle.
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