1. FX Outlook
  2. FX Options Weekly

Macro and Vol Commentary

Silver has gained upward momentum in recent weeks, with the softer dollar and global financial uncertainty driving the growth in prices, bringing the metal to a 12-month high of above $26.00/oz in the second week of April. With financial risks still not over, what is the outlook for silver in coming months? 

  • Like gold, silver heavily depends on macroeconomic factors, notably those coming from the US. Silver prices appreciated in recent weeks mainly due to safe-haven demand, a weaker dollar and lower bond yields.
  • The banking sector turmoil in the US and Europe and the fears of financial contagion have driven silver prices higher since March as investors rebalanced their portfolios towards less risky assets. 
  • Like gold, silver seems to have benefitted from the depreciation of the dollar, due to the liquidity crisis caused by the collapse of the Silicon Valley Bank and subsequent risks from Credit Suisse. 
  • With the dollar declining in recent months, the greenback is past its peak and could go below the 100 level in Q2 2031 as the US growth erodes in the coming months. Given a strong negative correlation between the dollar and silver, it is a bullish sign for the white metal. 
  • The dollar dropped to 101.5 following US CPI report, which showed that inflation rose less than expected last month, raising expectations that the Federal Reserve is likely to stop hiking rates in H2 2023.
  • However, volatility is expected to remain elevated given high macroeconomic uncertainty, persistent US core inflation, and relatively strong labour market.
  • With the recent CPI report, the markets are still pricing in a slightly stronger possibility of a hike in May. Even though US annual inflation reduced to 5% in March, core CPI remained steady, with price pressures for services elevated. As a traditional inflation hedge, this could create more upside opportunities for silver over the long term. 
  • We expect US policymakers to raise the federal fund rate by 25bps during the next meeting in May but still accelerate a more dovish rhetoric in the coming quarters. 
  • Market expectations of the Fed’s softer stance by the end of the year have brought yields to a downward trend, which is expected to continue further, driving the narrative for the attractiveness of silver over the coming months. 

From the macroeconomic standpoint, the prolonged tight monetary policy, and a possible pullback in lending after recent bank failures could lead to a sharp slowdown in the economy. 

  • With a US recession still on the cards, growing systemic risk adds to silver’s case as a safe haven during the times of crisis. The persistence of inverted yield curve, historically used as an indicator of an upcoming recession, make a compelling case for precious metals.
  • As the appetite for the dollar is calming, silver, together with gold, might continue to shine as a traditional safe haven.
  • This, coupled with continued geopolitical uncertainty, should benefit silver’s speculative performance. With slowing growth in major economic sectors of the world, the threat of recession could bring silver prices to play around the $26 level in the next two months, with a possibility to breach it and approach $28 by the end of June.
  • We expect the price of silver to continue appreciating on a cup-and-handle pattern on the back of Fed’s monetary policy decisions. 

We expect the core inflation to remain sticky in the near term, and with this in mind, terminal rates from key central banks are likely to stay higher for longer, adding to slower GDP growth of major economies. We believe that the markets are calling victory over recession too early as the real impact of previous hikes is still to filter through. The outlook for silver remains positive in Q2 2023, attributed in part to positive spill overs from gains in gold, as they both continue to benefit from macroeconomic and geopolitical uncertainties. Less hawkish stance by the Fed would boost precious metal appetite, and higher levels of economic uncertainty would help investors shift their investments to safe havens. Overall, we are looking for a price-friendly environment for silver over the coming months, supported by a looming threat of recession and an eventual completion of the key rate hike cycles.  

Sources: Bloomberg, Bureau of Labour Statistics, Federal Reserve

Volatility Commentary

Last few trading sessions has seen silver consolidate at 25 -26 level after a 30% move higher from 20 – 26. The move came from safe haven demand as a result of the banking crisis and risk of contagion. General USD weakness has also helped XAGUSD break previous resistance at 24.67 as FED rate expectations have lowered due to slowing inflation. Next resistance level is 26.50. With CPI and non-farms already released this month and the large move higher in the pair, we believe a continued period of consolidation. Current 1m implied vol is at 30.7. At these levels, we look to sell vega. Vol only traded higher twice in the past two years.

XAGUSD Trade Idea

  • Short Straddle

  • Price in 200k XAG per leg

  • 3 week expiry

  • SELL XAGUSD ATM call. Strike 25.90

  • SELL XAGUSD ATM put. Strike 25.90

  • Receive circa 275k USD

  • Break-even 1.375 USD move, either side of 25.90

Positioning Charts

USDBRL NDO Positioning Data 29/03/2023 - 05/04/2023

USDBRL option expiries saw the size of calls diminish in the week ending April 12th, suggesting little upside conviction in the near term. The downside cover remained unchanged but has seen the range more spread out to 4.70-5.10 as markets tried to cover their positions more broadly. This suggests that appetite in the market has softened slightly, and investors are comfortable in the current range of 4.90-5.20, but a greater notional size of puts still creates opportunities for downside pressures in the near term.

Usd Brl 29 5

USDBRL NDO Positioning Data 05/04/2023 - 12/04/2023

Usd Brl 5 12 (2)

USDCNY Vanilla Positioning Data 29/03/2023 - 05/04/2023

USDCNY option expiry range tightened in the week ending April 12th, with the number of calls and puts becoming more concentrated within 6.80-7.00. This suggests that investors might be comfortable within the current levels, and the equal number of calls and puts suggests little conviction for prices in either direction. We expect prices to remain comfortable at 6.90 in the near term. 

Usd Cny 29 5

USDCNY Vanilla Positioning Data 05/04/2023 - 12/04/2023

Usd Cny 5 12 (2)

XAGUSD Vanilla Positioning Data 12/02/2023 -12/03/2023

XAGUSD option expiries saw a slight increase in the number of calls above 22 in the month ending April 12th, highlighting the recent upside trend that took place in recent weeks. A number of call options are expiring with a strike of 25, and some are seen taking place above 30. The puts were also brought forward to the strike of 25, suggesting this level will be key in the near-term expiries. Overall, market sentiment leans more bullish in the coming months.

Xag Usd Feb Mar

XAGUSD Vanilla Positioning Data 12/03/2023 - 12/04/2023

Xag Usd Mar Apr

Charts and Tables

FX Expiries

Expiry (44)

Historical Spot FX Volatility (30D Rolling)

Chart (38)

FX Matrix (today)

Spot (96)

Weekly Change

Week (77)

Key Events & Releases

Calendar (109)

Technical Charts

JP Morgan Global FX Volatility 


The index continued to weaken in recent days, breaking below the support of 9.50, and the index is now seen below this level. At the same time, a breach of longer-term moving averages in recent weeks highlights the downside conviction. The indicators point to the index being heavily oversold, and with %K/%D converging on the upside, we could see a change of trend materialise in the near term. The MACD confirms this, as it is about to converge on the upside, a strong buy signal. To confirm the acceleration of the upside trend, the index needs to break back above the 9.50 level before testing the 50 MA at 10.00 once again. Alternatively, if the index was to decline further, we could see levels retest at 9.34, the December low. The indicators point to a build-up of upside momentum in the near term, and we expect the index to find support at current levels.

Dollar Index 


The index continued to soften in recent weeks, breaking below the 102 level, but found support at 100.82 today, the February low, and has traded slightly above it since. The indicators point to a weakening downside momentum: the %K/%D is seen diverging on the upside out of the oversold. The MACD diff is negative and is about to converge on the upside, suggesting a strong conviction for higher levels. To suggest this momentum, the index first needs to break above the 101.40 level. A break above this level could signal further upside to 102 before 102.18, the 50 MA. Alternatively, if trend resistance holds, a breach of this level could set the scene back to 100.82 and 100, a psychological support level. We expect some moderate upside in the near term but for the moving averages to cap any strong momentum.



The pair rallied in recent days but found resistance around 26.00 today; for now, this level is holding firm, but stochastics point to a sharp trend reversal in the near term. The %K/%D has converged on the downside and is now falling sharply, leaving the overbought. The MACD diff is positive and converging. Prices would first need to break below 25.00 to suggest the trend reversal to 50 MA of 25.04. This could set the scene for 100 MA at 24.17. Alternatively, if moving average levels hold, we could see the pair test the 26.00 level before the 26.22, the April 2022 high. The indicators point to a sharp trend reversal in the near term, and to confirm this, the pair needs to confirm the resistance at 26.00 first.



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