Silver Vs. The US Dollar: Who Will Win This Battle?
The price of silver got hammered last week. After an eight-day losing streak, it should be time for a break. But how concerning is the situation in silver? Also, do we still believe our silver forecast is valid? Here, we look at the silver chart and the US dollar chart to answer this question.
We will start with the US dollar chart, as it’s the driver of weakness in precious metals. We can see a seven-day winning streak on the US dollar (7 green candles in a row), and Friday was the first red candle. This is no surprise, as silver has been losing ground for eight straight days.
The US dollar arrived at the crucial 103-104 level. We marked the 103.3 level and said to our members that it is the single most important price point on the US dollar chart. The US dollar should calm down here in order to let silver shine.
In the meantime, the silver price chart does not show any structural damage, even after declining for eight straight days. What we observe is resistance at $27 (spot silver) and big support right below $22. Moreover, silver is currently testing a falling trendline, the one that originated from the ‘Reddit pump’ in February of 2021.
So, there is not a lot that we can learn from both charts, right? Not so fast. We believe that there is one elephant in the room here: the US dollar is hitting multi-year highs while silver continues to consolidate. It didn't even hit key support, not yet.
In other words, we believe that silver is showing relative strength in light of an ultra-strong US dollar.
Stated differently, if and when the US dollar decides to calm down, this would open the door for a big run in silver. The one and only question is whether the US dollar will find resistance in the 103.3-104.0 area, or whether it will clear this level (on a three-week closing basis).
We will know soon, and the attractiveness of silver as an investment (also if our silver forecast will be in play) will also become clear very soon. Our best bet is that silver support will be respected, and we explain in our weekend updates in Trade Alerts and Momentum Investing why we believe so.
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