Fast start or false start for commodities: Silver
Tony Sycamore January 4, 2021 1:10 PM
The trading scoreboard has reset and it appears commodity traders are eager to make a fast start in 2021.
Generally I am reluctant to enter new trades during the first week of the New Year when liquidity is notoriously poor. This is because many professional traders who provide a large chunk of the volume, often spend time away from screens to be with friends and family and to freshen up for the year ahead.
For less experienced traders unsure of the implications of poor liquidity, look no further than the chart of AUD/JPY from 2 years ago. On January 3rd, 2019 in the blink of an eye, AUD/JPY plunged almost 500 pips before an equally speedy recovery.
Compounding this weeks liquidity challenges is the Georgia Senate run-off (5th Jan) and US Electoral College vote (6th Jan) to confirm the US Presidential election result.
The Republicans need to win at least one of the two Georgia runoff elections to retain control of the Senate. The polls (for what they are worth) are now showing both seats favouring the Democrats.
A Democrat-controlled House and Senate would likely pave the wave for further stimulus in 2021, as well as tax hikes. A combination thought to be negative for the U.S dollar, supportive of commodities, and neutral for equities.
At the Electoral College vote (Thursday morning AEDT) a group of Republican Senators supported by Donald Trump is expected to mount a last-ditch attempt to overturn the election result. While their actions are unlikely to change the course of events, it could bring volatility.
Despite Silver’s 2.50% gain today, the jury remains out as to whether the rally will prove to be a fast start or a false start.
Technically, the move from the $21.89 low is now eyeing the downtrend resistance $27.30/40ish, coming from the August $29.85 high. A sustained break above $27.40ish would confirm the bullish bias and should result in a retest of the August $29.85 high.
Keeping in mind, should Silver fail to see a sustained break above the $27.30/40 resistance and then fall back below near-term support $26.10/80ish, it would warn of a deeper retracement towards $25.00.
Source Tradingview. The figures stated areas of the 30th of December 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.