Silver investments: all of a sudden! Negative interest rate expectations sweep the market, challenging the fed’s bottom line? Silver watch non – farm!

In a similar move to gold, spot silver was trading around $15.40 on Friday after a big overnight rally, awaiting what could be the worst non-farm payrolls report on record later in the day.

Last day silver suddenly pulled more than 3%, successfully overcome the $15 mark, the highest hit $15.43, close to the key above the 60-day average level of 15.54.

According to statistics from real-time information and data update website worldometers, as of 11:22 Beijing time on May 8, there were more than 3.91 million confirmed cases of covid-19 globally, of which 3,917,532 cases have been confirmed and 270,720 cases have died with more than 270,000 cases.

Among them, the total number of confirmed COVID 19 cases in the United States exceeded 1.29 million, with 1,292,623 cases, and the total number of deaths exceeded 76,000, with 76,928 cases.

In addition to the grim U.S. jobless claims data on Thursday, U.S. federal funds rate futures contracts suddenly began to price in a slightly negative interest rate environment that began in December, sending the dollar off a two-week high.

The fed funds rate contract extended this week’s rally, with futures briefly trading above 100 in the first quarter of 2021, suggesting a negative future for U.S. benchmark rates. Fed chairman colin Powell has adamantly opposed the idea of interest rates falling below zero, but that hasn’t stopped traders from speculating and dovish price action swept through currency markets on Thursday.

Fed officials, including chairman colin Powell, have said they don’t think negative interest rates are appropriate.

The fed is seen as reluctant to cut interest rates into negative territory for fear it might not be effective in stimulating growth and could disrupt the vast U.S. money markets.

“Anything is possible,” says Tom di Galoma, managing director of Seaport Global Holdings in New York. “We are in uncharted territory as far as the U.S. economy is concerned.”

Alan Blinder, a professor of economics at Princeton university and former vice chairman of the federal reserve, warned in a recent interview that “while there is a high probability of a u-shaped economic rebound in the United States, a hasty restarting of the economy could lead to a second or even third wave of pandemic shocks that could eventually drag the economy into a w-shaped rebound.” The “Spanish flu” of 1918 caused three waves of outbreaks in the United States, he said.

Mr Blinder thinks the fed could consider cutting rates to minus 0.5 per cent, but admits: “the fed is very resistant to that. They seem willing to accept all options except negative interest rates.”

Jeffrey Gundlach, chief executive of prominent bond fund manager DoubleLine Capital, said on twitter on Wednesday that the fed would come under increasing pressure to cut interest rates to negative as the Treasury stepped up short-term bond issuance, but said any move to do so would be “fatal.”

MichaelGapen, chief U.S. economist at barclays, said if expectations of deflation intensify, the market could force the fed to cut interest rates, which would leave the 10-year Treasury yield close to zero and the yield curve flattening further. He said the record low yields on two-year and five-year Treasury notes, combined with the negative benchmark rate being priced into federal funds futures early in 2021 on Thursday, reflected a number of factors. While excess reserves are likely to be the dominant factor, the growing recognition that the us may be entering or has entered a deflationary spiral is likely to exacerbate expectations of negative policy rates.

Technical analysis:

The dollar

On the daily chart, the dollar index on the day to fall back from the key 100 level, is still under pressure, close to the key 50 day average level. From the technical point of view, MACD green kinetic energy column weakened nearly disappeared, RSI index hovering around 50, KDJ random index to rise above the 50 level, the rebound power is not enough.

On the 4-hour chart, the dollar index has fallen sharply after hitting a high of 100.40 and is now testing its last moving average to support the 99.65 level. MACD green kinetic energy column began to expand, KDJ random index fell below the 50 level, short term may continue to fall.

silver

On the daily chart, silver remains firm after surging more than 3 percent last day and is now approaching the key resistance level of the 50-day moving average. The MACD red momentum column was very weak, with the KDJ random index heading higher above the 50 level, with the rally focused on non-farm performance in the evening.

On the 4-hour chart, the silver price on the day of a big breakout, break through all the resistance to the average, the highest test 15.40 above, pay attention to the stability of these average levels. MACD red kinetic energy column slightly expanded, KDJ random index up close to the overbought level, focus on today’s non-farm farm data performance.

fundamentals Positive factors:

  1. According to statistics from real-time information and data update website worldometers, as of 11:01 Beijing time on May 8, there were more than 3.91 million confirmed cases of covid-19 globally, with a total of 3,917,531 confirmed cases and 270,720 deaths of more than 270,000.
  2. New claims for state unemployment benefits fell for the fifth straight week to 3.169 million in the week ended May 2, labor department data showed on Thursday. Over the past seven weeks, the number of americans out of work has soared to 33 million.
  3. Federal Reserve governor kashkari said a quick economic recovery from the novel coronavirus crisis was unlikely. He warned that the restart could be phased in and that a second wave of infections might require the resumption of containment measures.
  4. Us data released on Wednesday showed employment at ADP, known as “small non-farm”, fell by 20.236 million, the worst performance on record, and the total number of jobs lost in just one month was more than double the total lost during the great depression. The ADP report set the tone for Friday’s non-farm payrolls report, which is expected to show a 21.5 million decline in April.

Fundamental negative factors:

  1. President Trump and vice president pence tested negative for a novel coronavirus, a White House spokesman said Thursday.
  2. US President Donald Trump tweeted that the White House task force on the new pandemic response would work indefinitely, but that the new focus would be on security and restarting the economy.
  3. House Democrats are pushing a massive fifth round of novel coronavirus rescue legislation in what could be their most far-reaching effort yet to deal with the economic impact of a pandemic, with a multi-trillion-dollar stimulus package in the works. The cost could match or exceed the $2.2 trillion CARES act passed in March.
  4. Vice President Mike Pence said the White House is in discussions to disband the new outbreak task force and possibly transfer the response to FEMA.

Leave a Reply

Your email address will not be published. Required fields are marked *