The USD continues to decline, with the EURUSD pair rising six straight days, supporting precious metals. On Friday, silver was up half a percent, trying to settle above the 24 USD level again, while gold was seen changing hands near 1,815 USD.
US labor market under scrutiny
The headline event of today’s trading will be the US labor market update for August. Traders expect 750,000 new jobs, according to the non-farm payrolls methodology, down from 943,000 in July. The unemployment rate should improve slightly to 5.2% from 5.4% previously, and the year-on-year wage growth is forecast to stay at 4.0%.
The market’s initial reaction should be obvious this time – should the NFP number end below 750,000, stocks, bonds, and precious metals will most likely move sharply higher. On the other hand, if the NFP surprises to the upside, equities, and precious metals should decline, sending the USD higher.
Later today, the ISM survey from the services sector is due. Market participants anticipate a decline to 61.5, from 64.1 previously , possibly undermining the greenback as the services sector is the most important in the US economy.
The reasoning is simple – if the economic data start to slow down over the following weeks, the Fed might delay its tapering process, which would be a big dovish decision.
Is the technical analysis bearish?
Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said recently.
She thinks that silver will fall toward 18.95 USD once it breaks below 21.17 USD. That would be quite a considerable drop, although the 21.17 USD support is circa 12% below the current price of 24 USD.
The current consolidation phase looks like a rising wedge pattern, which in this case, could be a continuation formation in the current medium-term downtrend.
Should silver drop below 23.50 USD, the pattern might be activated, pointing to a decline toward 23 USD or possibly lower. Alternatively, the resistance seems to be at this week’s highs near 24.15 USD. If silver rises above them, the pattern might be invalidated, with the metal possibly rising to the 50-day moving average at 24.87 USD.
However, since volatility will be elevated today due to the NFP release and technical analysis is not as relevant as major data news, everything will be decided after the figures, and a new short-term trend might begin.