Silver Squeezes Higher as USD Slumps
27 September 2022
It looks like the recent rally in the USD could be over for now as investors have decided to start taking profits, bringing the EURUSD pair up 0.25%, while the GBPUSD pair rose to 1.08.
A weaker USD generally leads to an optimistic sentiment, helping stocks and commodities, today pushing silver up nearly 2% during the US session.
US data mixed
According to the monthly statistics released by the US Census Bureau on Tuesday, orders for durable goods in the US decreased by 0.2%, or $0.6 billion, in August to reach $272.7 billion. This result was better than the market's forecast of a 0.4% decline.
Based on the report, new orders went up 0.2% when transportation was excluded. "Defense excluded, new orders fell by 0.9%. The decline of $1.0 billion or 1.1% to $92.0 billion was mostly caused by transportation equipment, which has also fallen two months in a row."
Meanwhile, according to Reuters, St. Louis Federal Reserve Bank President James Bullard stated on Tuesday that the US has a significant inflation problem.
"The credibility of inflation targeting regime is at risk," Bullard added and argued that they must no recreate the volatile 1970s era. "The labor market is very strong, this gives us room to take care of inflation as soon as we can."
Short-term relief rally?
Silver is now trying to break above previous lows near 18.80 USD, which constitutes the first major resistance. If broken to the upside, a further rally toward the current swing highs near 19.80 USD could be expected.
Alternatively, if the price drops below today's lows at 18.35 USD, sentiment might quickly change back to bearish, targeting the 18 USD support in that scenario.