Although December Silver is down over 1%
this afternoon, investors are still stubbornly holding on to long positions,
preventing this market from following through on its expected correction.
Silver is down after testing the Fibonacci
retracement level of the 24.95 to 22.84 range. Despite the selling pressure,
the main trend on the daily chart is still up. If today‚Äôs high becomes a
secondary lower top, then look for downside momentum to build, eventually
sending this market through 22.84 and turning the main trend down.
Once this is accomplished, then look for
the down move to accelerate into a 50% price target at 21.37.
The strong rally in the U.S. Dollar against
all major Forex markets has put this index in a position to change the trend to
A story circulating in the Wall Street
Journal is the catalyst behind today‚Äôs rally in the Greenback. In the article, the WSJ suggested the Fed
‚Äúmay opt for a more measured dose of QE this time around rather than the
shock-and-awe version which characterized QE1‚ÄĚ.
Traders are paring long positions against
the Greenback as they seem to believe that the Fed is giving in to some G20
criticism regarding their aggressively expansionary monetary policy. A few G20
members believe that the Fed‚Äôs aggressive spending has been driving up assets
in the past, but that today‚Äôs global economic conditions warrant a more
conservative approach to stimulating the economy.
The article goes on to further state that
the Fed is likely to purchase a few hundred billion dollars of Treasury Bonds
rather that the previous estimate of $1 trillion. This speculation is leading investors who
aggressively shorted the Dollar to lighten up on their positions, triggering a
short-covering rally in the Greenback.
Technically the Dollar Index is poised to
take out the last swing top on the daily chart at 79.18. A move through this
level will turn the main trend to up. Initial gains could be limited because
the nearest resistance is a 50% level at 79.58, but once this level is
overcome, look for an extension of the rally to 80.46.
In other markets, the December Australian
Dollar has formed a secondary lower top, putting this pair in a position to
change the trend to down on a move through the last swing bottom at .9661.
Further supporting this assessment is the fact that today‚Äôs sell off has
pressured this market through an uptrending Gann angle at .9670. Currently
minor support is being provided by a short-term Fibonacci level at .9658.
The bigger picture suggests that a change
in trend to down is imminent, putting the Aussie/U.S. Dollar pair in a position
to accelerate to the downside with .9386 a possible target.
Fundamentally, the Australian Dollar
weakened after a report showed that quarterly inflation was slightly
weaker-than-expected. This news dampened expectations that the Reserve Central
Bank of Australia
would raise interest rates at its next meeting on November 2.