European Open: Silver’s rally has been strong, but a pullback could be due

Asian Indices:

Australia's ASX 200 index rose by 113 points (1.63%) and currently trades at 7,059.20
Japan's Nikkei 225 index has fallen by -373.51 points (-0.0143%) and currently trades at 25,720.99
Hong Kong's Hang Seng index has risen by 400.63 points (1.99%) and currently trades at 20,545.92
China's A50 Index has risen by 1.03 points (0.01%) and currently trades at 12,978.00

UK and Europe:

UK's FTSE 100 futures are currently up 14 points (0.19%), the cash market is currently estimated to open at 7,568.09
Euro STOXX 50 futures are currently up 11 points (0.28%), the cash market is currently estimated to open at 3,893.29
Germany's DAX futures are currently up 44 points (0.31%), the cash market is currently estimated to open at 14,225.67

US Futures:

DJI futures are currently up 13 points (0.04%)
S&P 500 futures are currently up 25.25 points (0.23%)
Nasdaq 100 futures are currently up 3.5 points (0.09%)

It was a mixed session for equity markets overnight with indices for China rising over 2% and the ASX erasing most of Tuesday’s losses and up around 1.5%. Investors remain upbeat on China’s reopening despite the rise in Covid cases. Yet shares across Japan had some catching up to do on their first trading day of the year and were down around -1.4%. The fact remains that volumes remains well below their usual levels and directional movements appear fickle.

German consumer prices fell to 8.6% y/y from 10%, which likely marks peak inflation at 10.4% two months prior. The -1.4% percentage point drop of the annual rate was its most aggressive since 1992, and the m/m rate contracted for the first time in a year at -0.5% (which was is fastest contraction in two years). With producer and wholesale prices also tumbling, it’s looking like the worst is behind Germany which is great news for the EU overall.

France release inflation data at 07:45 but it is expected to tick higher to 6.4% y/y (6.2% previously whilst core inflation is forecast to rise to 7.2% y/y (7.1% previously). PMI data is also scheduled today for Sweden, France, Spain, Italy and Germany.

The US session presents the ISM manufacturing report at 15:00 GMT, which is expected to contract for a second month and at its fastest pace since May 2020. With equity markets remaining sensitive to recession concerns that it has the potential to weigh further on Wall Street should it come in worse than already expected. The FOMC December minutes are released at 19:00 GMT where traders will look for further clues of a lower terminal rate, which could be further supportive of gold prices if traders like what they find.

The Australian dollar is the strongest major on China’s recovery hopes, although US indices are yet to show any interest of tracking China’s market’s higher.

EUR/GBP fell to a 7-day in line with yesterday’s bias, thanks to the soft inflation report from Germany. Prices are retracing higher on the intraday timeframes but we would consider fresh bearish setups below 0.8843 for an anticipated move down to the 0.8760 area.

Silver daily chart:

I do not expect this to be a popular view, given the excitement of the rally on metals in general in recent weeks. But no trend lasts for ever and we’ve not really seen much of a pullback on silver prices lately. Besides, silver has risen nearly 40% since the September low and fast approaching the upper trendline from a wide (slightly bearish) channel).

Prices are holding above trend support on the daily chart, but a bearish divergence has been forming with the RSI (14) as its rally has lost steam over the past couple of weeks. A bearish pinbar also suggests bulls are losing control, so we’re now waiting to either see momentum turn lower or provide a series of bearish reversal candles below $25.

The main issue with trying to pick turning points are it can leave one vulnerable to a series of false entries and/or giving up before the turn. Therefore, bears may want to use smaller positions with a wider stop, and fade into spikes below $25 before increasing exposure if momentum does finally turn lower. Alternatively, bears could wait for a break beneath the monthly pivot point to confirm a trend reversal on the daily chart.

Economic events up next (Times in GMT)

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.