Silver analysis
Silver has broken below short-term support around $23.45 to $23.60 today, an area which could turn into resistance if the bears hold their advance on a closing basis. While it is far too early to say the metal has topped, today's price action would certainly appease the bears.
The precious metal had previously struggled to break above long-term resistance around $24.00. Today's sell-off was triggered by ADP data showing a much stronger jobs market than expected.
ADP reported private payrolls rose by 235,000 in December which was significantly more than 152,000 expected. In addition, initial jobless claims came in weaker, at 204K vs. 230K eyed, with continuing claims also declining. The data comes as Amazon has announced a huge 18,000 job cuts, with several other companies in the tech sector also recently announcing job cuts.
Today’s stronger employment data has therefore reduced fears about a downturn in employment and has raised worries that wage inflation could accelerate further and thus provide a major source of risk in the inflation outlook. Accordingly, traders have pushed up their expectations for the terminal interest rates in the US. The June Fed funds futures contract implies a peak interest rate of above 5.00% now, much higher than at the start of the week.
Following the publication of the ADP payrolls data, the dollar dropped and low and zero-yielding assets tumbled. Gold fell further below the $1850 level which it had broken overnight.
It is all about the close now from a purely technical standpoint. From a macro perspective, it is all about Friday's jobs report and CPI next week. Together, these figures have the potential to determine the direction of FX for the next several weeks.
By Fawad Razaqzada on behalf of FOREX.com
The precious metal had previously struggled to break above long-term resistance around $24.00. Today's sell-off was triggered by ADP data showing a much stronger jobs market than expected.
ADP reported private payrolls rose by 235,000 in December which was significantly more than 152,000 expected. In addition, initial jobless claims came in weaker, at 204K vs. 230K eyed, with continuing claims also declining. The data comes as Amazon has announced a huge 18,000 job cuts, with several other companies in the tech sector also recently announcing job cuts.
Today’s stronger employment data has therefore reduced fears about a downturn in employment and has raised worries that wage inflation could accelerate further and thus provide a major source of risk in the inflation outlook. Accordingly, traders have pushed up their expectations for the terminal interest rates in the US. The June Fed funds futures contract implies a peak interest rate of above 5.00% now, much higher than at the start of the week.
Following the publication of the ADP payrolls data, the dollar dropped and low and zero-yielding assets tumbled. Gold fell further below the $1850 level which it had broken overnight.
It is all about the close now from a purely technical standpoint. From a macro perspective, it is all about Friday's jobs report and CPI next week. Together, these figures have the potential to determine the direction of FX for the next several weeks.
By Fawad Razaqzada on behalf of FOREX.com
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