Technical Analysis XAGEUR : 2019-04-30

World silver shortage persists

In 2018, world silver production decreased by 2% to 855.7 million ounces or 26.62 thousand tons. Will the XAGEUR rise?

Such a movement indicates the strengthening of silver and weakening of the euro. According to the GFMS agency, the reduction in world production of this precious metal turned out to be the highest on record and occurred for the 2nd year in a row. It was mainly observed in mines in Canada, Guatemala and the USA. Let us note that the global silver shortage has been observed for the 10th year in a row and has led to a reduction in world reserves. Nearly 56% of silver is used in industry, 21% for jewelry purposes and 17% for investment purposes. Last year, global supply of this metal was 1004 million ounces (including silver scrap, production and reserves) and decreased by 2.7% compared to 2017. Global demand rose by 3.5% and reached 1033.5 million ounces. Taking into account reserves, this led to the negative world net balance of silver of 80.1 million ounces. However, metal prices have fallen and we think this is not a typical case. Concerning the euro, such a negative factor can be noted: the economy of the European Union lags behind the one of the US. The US GDP growth in the 1st quarter was 3.2%. In the EU, the same indicator will be released on April 30, but it is expected to grow only by 1.1%.

On the daily timeframe, XAGEUR: D1 is trying to move upward from the downtrend. At the same time, its decline slowed down and a number of technical analysis indicators formed buy signals. The further price increase is possible in case of a reduction in world production and preservation of high demand.

The Parabolic Indicator gives a bullish signal.
The Bollinger bands have widened, which indicates high volatility. Bothe Bollinger bands are titled upward.
The RSI indicator is below 50. It has formed a positive divergence.
The MACD indicator gives a bullish signal.
The bullish momentum may develop in case XAGEUR exceeds the last fractal high and the upper Bollinger band at 13.6. This level may serve as an entry point. The initial stop loss may be placed below the Parabolic signal, the two last fractal lows, the 200-day moving average line, the low since December of the last year and the lower Bollinger band at 13. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (13) without reaching the order (13,6), we recommend to close the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Position Buy
Buy stop Above 13.6
Stop loss Below 13