Silver is currently under pressure heading towards the nearest support level despite the weakness in the US dollar. Data shows that the industrial metal is hovering at $26.50 remaining under increased downside pressure. Recently, the US and China have confirmed that Phase 1 of their trade deal was progressing well. This news provided extra optimism to the world markets.
The same optimism has put some pressure on the precious metals markets that have benefited from haven buying in recent months. Notably, gold settled below the 20 EMA at $1945 and it currently continues to lose ground.
In the meantime, the gold/silver ratio has settled around the 72 levels. Interestingly, the ratio has remained near 72 for several trading sessions and its volatility has reduced significantly. If the gold/silver ratio manages to rise above 73, it will possibly develop an upside momentum which will exert more pressure on silver.
The US Dollar Index has returned to the 93 zone after it failed to settle above the 20 EMA at 93.45. Normally, a weaker dollar is a bullish catalyst for silver since it makes it cheaper for buyers who have other currencies. Currently, the positive catalyst is offset by the considerable gain in the US government bond yields.
Rising US government bond yields are, for now, bearish for precious metals that pay no interest. Higher yields on haven instruments increase the opportunity cost of holding silver or gold as the investor who owns precious metals in the portfolio misses the chance to harvest interest from safe bonds.
Silver Technical Analysis
The industrial metal continues to trend down near the closest support level that formed at $26.20. That support has already been tested many times and proved its strength. If silver manages to sink below $26.20, it will accelerate a downside momentum and head towards the 20 EMA at $25.90.
If silver plunges below the 20 EMA, there will be a serious problem for the bulls in this market. It will mean that silver has lost its current upside momentum. In that case, silver might rapidly drop towards the next support level located at $24.95.
The upside has a technical picture that has not changed for several days. Silver must get above the nearest resistance level located at $27.75 to enjoy extra upside momentum. That will confirm that the industrial metal is continuing with its upside trend. If silver moves above $27.75, it will head towards the recent highs set at $28.50.