2016-10-05 12:44:50

Review and dynamics
Yesterday, precious metals sharply fell down. A pair XAG/USD fell by 5.7% to $17.70 per troy ounce. This was the strongest decline since January 2015. From the highs reached early July at the level of 21.10 the pair XAG/USD fell down by 340 points; the price of silver has dropped by over 19%.

The pair has broken down two strong support levels 19.15 (ЕМА200 on 4-hour chart, ЕМА200 on the weekly chart) and 18.20 (ЕМА144 on the daily chart) within a few days and stopped at the support level of 17.70 (ЕМА200 on the daily chart).

At the beginning of July the pair XAG/USD has reached the level of 21.75 (Fibonacci 23.6%) in the upward correction after the decline since May from the level of 47.90 to the level of 13.65. However, later the pair XAG/USD fell again due to the rise in the USD in anticipation of the increase of the US interest rate.

Our opinion
In the summer representatives of the US Fed said that the short-term risks to the US economy has decreased Probability of the rate hike by the end of this year has grown to 60%. Despite the continuing uncertainty in the global economy, monetary policy tightening in the USA will put pressure on the precious metals including silver.

On 4- hour, daily and weekly charts the indicators OsMA and Stochastic give signals to sell; on the monthly chart the indicators also give signals for short positions.

The decline in the pair will continue in case of the breakdown of the level of 17.70.

If the decline continues next support level will be at the levels of 16.05 (ЕМА200 on the monthly chart) and 13.65 (the lows of January 2016).

If the US Fed continues monetary easing policy, the USD will fall, while the price of the precious metals will go up.

In case of breakout of the resistance level 19.15 the pair XAG/USD will go back to the uptrend. In case of breakout of the resistance level 21.75 the pair XAG/USD will resume movement in the ascending channel on the weekly chart with the upper limit near the level of 24.00 (the highs of mid-2013).

The prices of the precious metals are under the influence of two opposite factors: on the one hand, it is high probability of the rate hike in the USA; on the other hand, it is the continuing uncertainty in the global financial markets and the adherence to monetary easing policy by many Central Banks. Both of these factors are affecting the price of the precious metals dragging them to different directions. Meanwhile, probability of the rate hike has the stronger influence.

Support levels: 17.70, 17.25, 16.05 and 13.65.
Resistance levels: 18.20, 19.15, 20.00, 20.60, 21.10 and 21.75.

Trading tips
Sell Stop: 17.65. Stop-Loss: 17.80. Take-Profit: 17.25, 16.05 and 13.65.
Buy Stop: 18.10. Stop-Loss: 17.70. Take-Profit: 18.20, 19.15, 20.00, 20.60, 21.10 and 21.75.

Breakdown of the level of 18.20
Breakdown of the level of 18.20

Support level is 17.70
Support level is 17.70