DOLLAR STRENGTH UNDERMINES PRECIOUS METALS AS SILVER EXTENDS “FLASH CRASH”
The US dollar strengthened against a basket of world currencies on Monday, placing added strain on precious metals, with silver prices plunging to fresh 15-month lows.
The US dollar index (DXY), a broad performance gauge of the greenback, rose 0.2% to 96.16. The world’s most actively traded currency made small inroads against the euro, which edged lower despite mostly upbeat economic data.
Germany’s seasonally adjusted trade surplus expanded to €20.3 billion in May from €19.7 billion the previous month, data from the Federal Statistical Agency reported Monday. Analysts in a median estimate called for a trade surplus of €20.2 billion.
Exports rose 1.4%, while imports gained 1.2%. Both indicators were well above the consensus forecast.
Meanwhile, Berlin’s current account surplus expanded to €17.3 billion from €14.9 billion, official data showed.
Eurozone investor confidence was virtually unchanged this month, according to a monthly survey from Sentix. The Eurozone investor confidence index edged down to 28.3 from 28.4.
Earlier in the day, the Chinese government said inflationary pressures moderated last month. Beijing’s consumer price index (CPI) declined 0.2% in June. In annual terms, it was unchanged at 1.5%. Meanwhile, the producer price index (PPI) came in at an annualized 5.5%, unchanged from May’s reading.
In commodities, silver prices plunged more than 1% on Monday in a continuation of Friday’s apparent flash crash. The grey metal briefly declined by as much as 11% on Friday. Analysts attributed the loss to algorithmic trading, which has induced heavy volatility in the market.
The grey metal is trading at its lowest level since April 2016.
Oil prices were also down nearly 1% ahead of North American trade. US West Texas Intermediate (WTI) futures are currently trading at two-week lows on the New York Mercantile Exchange.
A rebounding US dollar appears to be pressuring the euro, which is struggling to maintain the coveted 1.14 level. The EURUSD traded within a narrow range Monday, as traders awaited fresh market catalysts. The pair faces a weak support line at 1.1366. On the opposite side of the ledger, immediate resistance is located at 1.1465.
Silver prices are engulfed in bearish pressure following Friday’s flash crash. The extent of the declines has rendered the short-term technical indicators virtually obsolete as the market enters what appears to be a large-scale correction. Silver’s drop has far outpaced gold’s in relative percentage terms. As a result, gold’s premium over the grey metal has reach more than one-year highs.
Crude oil is under pressure again, as the market struggles to justify the multi-week rally. Intraday prices have fallen below last week’s low, a move that should put traders on high alert.