As usual in in the month of July, it was a quiet month in the markets with many traders in the US and Europe taking some well-deserved time off from work. With trading volumes significantly lower than usual, however, small orders can make a larger impact on market prices than they would under normal circumstances.
With these lower trading volumes, the quiet trading season can therefore still be full of opportunities for those who keep an eye on what goes on in the market.
US dollar action
We start this month by taking a look at the US Dollar Index (DXY), which has shown some interesting price action over the past month.
Just as we pointed out might happen previously, the US dollar did see a further sell-off after falling through the rising trading channel it has been in since the beginning of the year. However, the price quickly rebounded, although the previous range floor now serves as resistance in the chart.
As we have seen over and over again this year, the US stock market has continued to grind higher even when “everyone” thought it was going to come crashing down. As a result, the S&P is now once again close to its all-time high level. And with no obvious technical resistance ahead, further price gains should be expected.
One slightly worrisome factor, however, is that the momentum in the price gains is clearly weakening, as indicated by the divergence between the price and the Relative Strength Indicator (RSI). Although this divergence for now is not very large, this could signal that a reversal in the market is about to happen.
At this point, the risk:reward for swing trades in either direction on the S&P is therefore not very favourable in our view.
A market that doesn’t get a lot of attention here on this blog or among forex traders in general is the silver market. Naturally, gold takes most of the attention since spreads there tend to be lower and it reacts quickly to news from the economy. However, silver has just proven that it should not be ignored either.
Starting in the beginning of July, the silver price has experienced a huge rally that has brought it up by 10 percent in just one short month. Looking back to the beginning of June, however, the rise is even more impressive with a gain of over 13 percent.
Since we are now at the highest levels of 2019, it makes more sense to take a look at the weekly chart of silver.
If there is one thing the history of the silver market has shown us, it is that this metal can move a lot once it starts moving, as was seen in early 2016 and in particular during the huge rally of 2010/2011.
One reason for this is that it is a much smaller market than gold, with lots of speculators active in it. In addition, the market is dominated by industrial players who need silver for their production processes. As is well-known in the market, these players will pay whatever the price is to get access to silver, which reinforces the underlying trends in the market.
As a result, what we have seen over the past two months in the silver market may in fact just be the beginning of something bigger.
Free forex trading workshops in Australia
If you would like to learn how to take advantage of the moves in silver and other exciting markets, consider joining us for our next free forex trading workshop somewhere in Australia. We regularly host these events around the country where we give away some of our best trading strategies for free.
We look forward to welcoming you at our event!