The third trading session the dollar strengthens in the foreign exchange market against the assets-shelters - yen, franc, precious metals. The dollar received an additional positive impulse today after the first results of the elections to the UK Parliament became known, and after the ECB yesterday's meeting. As you know, the ECB kept the benchmark interest rate at 0%, the deposit rate - at the level of -0.4%, the rate on marginal loans - at the level of 0.25%. The QE program, in which the ECB monthly buys European assets worth 60 billion euros, has also remained unchanged.
The pound today collapsed in the foreign exchange market immediately after the first results of the exit poll of the elections became known yesterday at 21:00 (GMT), according to which the Conservatives and its leader, the current Prime Minister of Britain, Theresa May, failed to achieve an absolute majority in the country's parliament. The ruling Conservative party, although it remains the largest in the parliament, received 314 of 650 seats. Most votes are provided by 326 seats. Any factors that increase uncertainty around Brexit will be negative for the pound and the British stock market.
The US dollar, meanwhile, is building up its positions in the foreign exchange market. The index of the dollar WSJ, which reflects the value of the US dollar against the basket of 16 other currencies, rose yesterday by 0.1%, to 88.21.
Now, after the ECB meeting, investors' attention shifts to a meeting of the US Federal Reserve System, which will be held on June 13-14. Most market participants expect an interest rate increase of 0.25%.
August gold futures fell 1.2% yesterday, to 1278.20 dollars per troy ounce.
Other precious metals, in particular silver, are also falling in price. The pair XAG / USD is down today for the third consecutive session, trading during today's European session near the mark of 17.35 dollars per troy ounce. The probability of an increase in the interest rate in the US next week is estimated by investors higher than 90%. As you know, higher interest rates make dollar assets more attractive to investors, and lead to the sale of precious metals that do not bring interest income. At the same time, the costs of their acquisition and storage are growing.
And, nevertheless, the continuing geopolitical risks, as well as political uncertainty in the UK, the US, France, where elections to the local parliament will also take place this weekend, support the demand for precious metals.
Of the news for today, it is worth paying attention to the publication at 12:30 (GMT) of data from the labor market of Canada, which may increase volatility in the foreign exchange market.
Support and resistance levels
For the past 4 weeks, the pair XAG / USD has skyrocketed in the upward short-term channel on the 4-hour chart, the upper limit of which is close to the level of 17.86.
At the moment, after a three-day corrective decline, the pair XAG / USD is trading near support levels of 17.25 (EMA200 and the bottom line of the uplink on the 4-hour chart), 17.35 (EMA200, EMA144 on the daily chart).
Indicators OsMA and Stochastics on the 4-hour, daily charts went to the side of sellers.
The reduction scenario is associated with a breakthrough in the support level at 17.25 and a further decline in the downward channel on the daily chart with targets of 16.85 (the Fibonacci level of 23.6% of corrective growth to the fall of the pair since August 2016 and the level of 20.59), 16.05, 15.72 (low of 2016 ).
The immediate goal in the case of continued growth of the pair XAG / USD are the levels of 17.58 (Fibonacci level 38.2%), 17.86 (EMA144 on the weekly chart). Here, the upper line of the descending channel passes on the daily and weekly charts.
More distant medium-term targets are the levels 18.17 (Fibonacci 50%), 18.48 (EMA200 on the weekly chart and April highs), 18.75 (Fibonacci level 61.8%).
In the dynamics of the pair XAG / USD, one should pay attention to the current correlation with the pairs USD / JPY (-85%), XAU / USD (71%). Given the rather high cross-correlation, and how these pairs are relative to key support levels (EMA200, EMA144 on the daily chart), the conclusion suggests: either the pair XAG / USD will grow slightly (within 1.0% - 1.5%), Or remain at the current level of 17.35 (key support level (EMA200, EMA144 on the daily chart), but provided that the dollar in pairs USD / JPY, XAU / USD increases by the same amount (1.0% - 1.5%).
In the current situation of geopolitical uncertainty and on the eve of the Fed meeting next week, both options are possible.
Support levels: 17.35, 17.25, 17.00, 16.85, 16.20, 15.72
Resistance levels: 17.58, 17.86, 18.17, 18.48, 18.75
Sell Stop 17.23. Stop-Loss 17.46. Take-Profit 17.00, 16.85, 16.20, 15.72
Buy Stop 17.46. Stop-Loss 17.23. Take-Profit 17.58, 17.86, 18.17, 18.48, 18.75
*) Actual and detailed analytics can be found on the Tifia website at tifia.com/analytics