This week, silver prices surged significantly as investors capitalized on a sparse market caused by bank holidays in the United States and the United Kingdom. This technical resurgence suggests that investors tend to "buy the dip" in defiance of the substantial weekend declines.
Why Silver (XAGUSD) Moved Higher?
Anticipations of interest rate cuts in the US, economic stimulus in China, and geopolitical tensions propelled silver's early-week gains. Due to this momentum, silver reached its highest level in eleven years. Nevertheless, the rally encountered a decline in momentum as investors cashed their gains after the disclosure of pessimistic Federal Reserve minutes. Economic data released on Thursday further bolstered the likelihood of delayed rate cuts, which assisted in the precipitous price decline.
Economic Releases To Look At
Considerable attention is being directed towards the core personal consumption expenditures (PCE) price index on Friday. Given its status as the Federal Reserve's preferred inflation gauge, the outcomes of this indicator possess the potential to significantly impact silver prices. Over time, silver's utility as a hedge against inflation has diminished due to the opportunity cost of holding the metal increasing as interest rates increase.
The minutes of the most recent Federal Reserve meeting suggested that attaining the inflation target of 2% could require a more protracted period than originally projected. The CME FedWatch Tool indicates that traders now attribute a 62% probability of a rate reduction occurring by November 2024, which has dampened market expectations for such actions.
Silver Bears May Join Soon
If U.S. economic data continues to exceed expectations, silver prices could experience additional selling pressure. Recent events have witnessed a decline in bullish sentiment, as some investors have sold their positions or become bearish. The transition above is impacted by the Federal Reserve's determination to sustain elevated interest rates over an extended duration.
In light of the prevailing market conditions, a cautious outlook persists regarding silver. Although technical indicators indicate the possibility of a correction to the downside, the determination of short-term price movements will heavily rely on the impending inflation report and ongoing economic data. To mitigate potential volatility, traders ought to diligently observe critical support levels.
Silver Price Prediction Technical Analysis
In the daily chart of XAGUSD, the 100 day SMA remains as a major support as it remains below the 26.02 static line with a bullish slope. Moreover, the 20-day Exponential Moving Average is the immediate support below the near-term swing low.
The volume structure shows the confluence bullish signal, where the most recent high volume line remains at the bullish re-accumulation zone.
Considering the ongoing market momentum, a bullish continuation is highly possible in the XAGUSD price, where the main aim would be to test the 35.00 psychological line. On this path, a stable market above the 32.52 swing high could stabilize the possibility of bullish growth.
On the other hand, the 32.52 high could be a challenge for bulls, as a failure to break this line could signal a downside possibility. However, before anticipating a short opportunity, a bearish break below the 20-day EMA with a daily close is needed.
