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More solid US data sees precious metals drop sharply

Summary:

  • UoM beats forecasts to rise to 95.7
  • Factory orders also surpass expectations
  • Gold (-1.5%) and Silver (-2.5%) experiencing large selling with declines on the day

The final US economic data of the week has provided further good news for the US dollar with an increase in both sentiment and industrial activity being announced not long after the pleasing NFP report. The University of Michigan consumer sentiment index increased to 95.7 from 94.4 previously and this reading was comfortably stronger than the 95.0 expected. 

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 After a bit of a pullback lately the UoM consumer sentiment rose in January and remains very high by historical standards. Source: XTB Macrobond

There was also the release of the factory orders figures for December which showed in M/M terms +1.7%. This was inline with the prior reading (after an upwards revision from 1.3%) and better than the +1.5% expected.  

The US dollar is enjoying a strong end to what is now a fairly good weak with the greenback rising across the board. The largest gains can be seen against the cryptocurrencies but there are also notable gains against many of its G10 peers. To illustrate this point the GBPUSD is down by 1.1% today and the EURUSD has dropped by 0.7% whilst USDJPY is higher by 0.9%. 

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 The US dollar is enjoying a strong end to the week, boosted by some solid data points. Source: xStation

 The rise in the buck can be seen in the commodity space also with significant declines seen in Oil, Gold and Silver. The latter two are both highly sensitive to US data and the sell-off has been mainly seen following the NFP release.

A technical overview of Gold can be found here, so now let’s turn our attention to Silver which is even lower on the day than Gold (-2.5% vs -1.5%). The market has a strong move higher at the back-end of last year, but 2018 has been fairly rangebound. Today’s drop is one of the largest seen in many months and suggest that there could be more downside ahead. The 50% fib of the rally from the low of 15.60 back in early December comes in at 16.639 and this could be the next area to look for possible swing support. A break below here would be a blow for longs and could see further declines ahead. 

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 Silver has had a large decline today and is not far from the 50% fib of the recent rally. Source: xStation

  

 

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