Silver Price, American Stimulus, Covid, Sentiment – Talking Points
- Wall Street trading ends lower on Tuesday after failed Senate stimulus
- Silver prices fall despite weakening greenback as inflation expectations ease
- UK Covid-19 variant identified in US as hospitalizations hit new record
The S&P 500 and the Dow Jones Industrial Average closed in the red after hitting new all-time highs earlier this week, with both indices falling 0.22%. Wall Street opened optimistically higher on the prospect of increased stimulus monitoring after the measure passed a House vote on Monday night. However, Senate Majority Leader Mitch McConnell snubbed a fast-track measure despite the backing of President Donald Trump and several other GOP lawmakers.
Silver prices fell alongside US equities as the chances of increased budget support stalled and, in turn, weighed on inflation expectations. The weaker outlook was reflected in the Treasury market, with the 10-year breakeven inflation rate falling by one basis point. The weaker US dollar helped accelerate the rise in the risk-sensitive Australian dollar, with the AUD / USD rising on the day.
Meanwhile, anti-fiat gold prices managed to move up slightly as XAU / USD took advantage of USD weakness. However, the pessimistic greenback failed to support silver prices, with XAG / USD falling 0.02%. The decline against gold is likely the product of silver’s recent outperformance against the yellow metal. The ongoing debate over increasing stimulus payments will be at the center of concerns regarding market movements.
Silver, S&P 500, AUD / USD – 30 Minute Chart
Graphic created with TradingView
Wednesday’s Asia-Pacific Outlook
The Asia-Pacific session could see fallout from Wall Street’s weak performance. But, with a light economic calendar in the midst of the upcoming New Years holiday, stocks could hover near current levels. Japan’s Nikkei 225 index closed Tuesday’s session near its 30-year highs following stimulus news in the United States. That said, a slight pullback can likely be manifested in the Japanese index if traders continue to follow the same market theme as the past 24 hours.
Additionally, Covid-19 remains a lingering question mark for traders. While the vaccine headlines have supported a risk-taking environment in all assets since the US FDA granted the Pfizer-BioNTech vaccine emergency use approval earlier this month, an induced withdrawal by Covid is certainly not excluded. Indeed, a strain of Covid recently identified from the United Kingdom, this one more contagious, was identified in Colorado on Tuesday evening.
Its introduction could put pressure on sentiment in the coming weeks if it results in an identifiable increase in the number of cases. For now, however, markets appear largely immune to the ongoing spread, with hospitalizations in the United States continuing to accelerate. The Covid Tracking Project shows that the number of patients infected with the virus in US hospitals continues to rise, and on December 29, a record 124,686 hospitalizations were reported.
US statistics on Covid-19
Source: the Covid monitoring project
Silver technical outlook:
Silver’s current pullback may expand further with the 23.6% Fib retracement of the March-August move to 25.562, which could come into play to offer support. Year-end flows with the New Year just days away could skew price fundamentals over the next few days. That said, a resumption of the broader December uptrend could likely continue into 2021, but the next few days could see bulls looking sideways.
The overall XAG / USD uptrend from the Covid-induced March lows appears intact, however, with the 50 and 200-day simple moving averages pointing to higher ground. An inflection zone kicks in above handle 26, but a breach above would see the bulls challenge the 2020 high that sits just below handle 30. For now, a consolidation until ‘in 2021 seems the most likely, but outside of the short term higher ground seems to be favored in the technical outlook.
Daily money graph
Graphic created with TradingView
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— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter