Tuesday, 3 May 2011

Silver Plunges Lower Creating Buying Opportunity

In a volatile New York trading session the EUR/USD tested the 1.4900 level and the USD/CHF fell to a new all-time low. Spot silver plunged lower but may have created a buying opportunity. Tomorrow US unemployment data will be released

The EUR/USD rallied to a high of 1.4888 after better than expected US factory orders of 3.0% on forecasts of 1.9% which fed into euro buying before the pair fell back to 1.4818. A decline in equity markets spurred the selling of the euro with the S&P 500 trading lower by -0.62%. The GBP/USD looks to close near its low at 1.64462 from 1.6616 after disappointing manufacturing data. The USD/CHF hit a new all-time low as the USD continues to be sold. The pair traded as low as 0.8595 before climbing to 0.8613. Crude oil prices dropped as low as $110.29 to end the day near $110.90.

Silver prices plunged today by more than 8% to a low of $40.57 before trading back near $41.50. The drop is largely considered a technical correction and the low of the day coincides with a rising trend line off of the January low. Traders may find this an opportunity to buy into the uptrend on a bounce from the trend line. A protective stop should be placed underneath the rising trend line to protect against any further downside move in the commodity.

Tomorrow during European trade, markets will be focusing in on UK housing numbers and UK construction PMI. A positive output from these indicators may help Sterling rebound from today's lows after disappointing manufacturing data. During the New York trading, the ADP Non-Farm Employment Change and manufacturing PMI numbers will be out. Positive readings should feed into further USD selling.