Silver and NZD/USD Plummet Amid Rising U.S. Rates and Strong Dollar Pressure
As the U.S. rates continue to climb and the dollar remains robust, silver and NZD/USD hit fresh lows on Thursday, reflecting the impact of these market dynamics. However, despite the challenging environment, the proximity to key levels on the charts presents new trading opportunities for both long and short positions.
With the prolonged downward trend and the reduced expectations for rate cuts by the Federal Reserve, there is a growing risk of a potential short squeeze in the near future.
Traders Slash Fed Rate Cut Bets
Market sentiment regarding Fed rate cuts has significantly decreased due to strong U.S. economic data and statements from Fed officials, including Jerome Powell, indicating a potential slowdown in easing measures. The probability of a 25bps cut in December is now uncertain, with only three cuts projected by the end of 2025, a significant drop from the previous estimates.
US Bond Yields Powering Dollar Wrecking Ball
The diminishing expectations for rate cuts, coupled with the anticipation of expansionary fiscal policies under the Trump Administration, have led to a surge in Treasury yields, impacting the Kiwi and silver negatively. The movement in silver has been particularly influenced by the front-end of the U.S. interest rate curve, driven by Fed rate expectations.
Similarly, NZD/USD has also experienced similar trends, with the belly of the curve playing a crucial role in its movements, encompassing debt with maturities ranging from two to 10 years and reflecting fiscal policy implications.
Quiet Calendar an Invitation to Squeeze?
Despite the prevailing macroeconomic conditions characterized by higher U.S. rates and a strong dollar, the upcoming week features a notably quiet economic calendar, potentially creating an opportunity for countertrend reversals. The only event of significance in the near term is the U.S. retail sales report for October, scheduled for release later on Friday.
Silver May Have Put in a Near-Term Bottom
Silver may have reached a near-term bottom, as indicated by a hammer candle formation on Thursday. The convergence of uptrend support from February and horizontal support at $29.66 has sparked a likely price reversal. While momentum indicators favor a bearish bias, the price signal suggests a potential upside in the short term. Key levels to watch include $30.80 and $32.18, with traders advised to maintain tight stops for protection.
Kiwi Teetering on 2024 Low
On the other hand, NZD/USD appears less convincing for an upside move near-term, hovering around the low established during Japan’s market turmoil in August. With RSI (14) and MACD signaling bearish momentum, shorts are favored. Traders are advised to observe the price action closely, considering selling with a tight stop above .5850 or buying if the price fails to break convincingly below .5850, with potential targets at .5774 or a return to former support at .5912.
In conclusion, the recent developments in U.S. rates and the strength of the dollar have significantly impacted silver and NZD/USD. Traders should closely monitor key levels and remain vigilant for potential countertrend reversals in the current market environment to capitalize on new trading opportunities.