Inflation And Data Watch
US data showed the ADP Employment Change 4-week average eased from 14.75K to 9K, while Pending Home Sales for February rose 1.8% month on month after a 1% fall in January, beating expectations of -0.5%. The Dollar Index fell 0.15% to 99.68 and the US 10-year yield slipped by 2 basis points to 4.198%. Central bank policy remained in focus after the Reserve Bank of Australia raised rates by 25 bps. The Bank of Canada and the Federal Reserve are expected to keep rates unchanged, with more decisions due from the European Central Bank and the Bank of England. Technically, the price sits below the 50–200-day moving averages and the RSI is near 44, with resistance at $82.00–$83.00 and $86.50–$87.50. Support is seen at $78.00, then $73.50. Given the current market dynamics, we see silver’s weakness as a direct result of inflation fears fueled by higher oil prices, which have now climbed to over $95 per barrel. February’s CPI data, which came in hotter than expected at 3.4%, is forcing the market to price in a more hawkish Federal Reserve, overshadowing the normally positive influence of a weaker dollar. This suggests the market’s focus has shifted entirely to inflation and its impact on future monetary policy.Options Positioning Ideas
The bearish momentum is clear, and with the price below key moving averages, further downside seems likely. We are looking at the $78.00 level as the first critical test, a support zone that was established during pullbacks in 2025. Traders should consider buying put options with strike prices around $75 to capitalize on a potential break of this immediate support. The conflicting signals between a weak dollar and inflation fears have pushed implied volatility on silver options to a 12-month high of 45%. This environment is ideal for strategies that profit from large price swings, regardless of direction. We believe purchasing a long straddle, buying both a call and a put option with the same strike price and expiration, could be an effective way to trade this uncertainty. However, we are also watching the Gold/Silver ratio, which has widened to over 100:1, a level historically suggesting that silver is undervalued relative to gold. For those looking for a contrarian play, this could be an opportunity to buy far out-of-the-money call options for a low premium. A shift in market sentiment back towards precious metals as a haven could cause this ratio to revert sharply. For traders already holding long silver positions, the current weakness is a serious threat. Despite the US Dollar Index slipping further to 99.45, it is not providing any support, making it a deceptive indicator at this time. We advise implementing protective collars by selling a covered call to finance the purchase of a put option, shielding the position from a potential slide towards the deeper $73.50 support zone. Create your live VT Markets account and start trading now.
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