Silver (XAGUSD) has sustained a notable upward trend, rising by 0.96% in the current session and poised for a fourth consecutive gain. The surge is attributed to speculation around potential Federal Reserve rate cuts, the influence of the Lunar New Year on trading volumes, and the upcoming release of the US Consumer Price Index (CPI) data.
Traders are pricing in a 62% chance of the first cut happening in May, which could weaken the dollar and boost silver’s appeal. Also, trading volumes have been subdued due to the Lunar New Year holidays, but some analysts believe this limited buying pressure could indicate genuine interest rather than just short-covering.
However, all eyes are on the upcoming US Consumer Price Index (CPI) data, which is expected later today. A softer-than-expected inflation reading could bolster hopes for early rate cuts and send silver prices soaring. Economists predict a year-on-year CPI decline to 2.9% from 3.4%, potentially weakening the dollar and bond yields and making silver more attractive.
Technical
On the 4-hour chart, silver is trading at $22.899/ounce, consolidating around the 38.20% Fibonacci retracement level. The price action remains above the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating bullish momentum. The Relative Strength Index (RSI) at 61.81 also suggests upward strength.
A sustained break above the 38.20% Fibonacci retracement level could lead to a test of the 50.00% Fibonacci retracement level ($23.259/ounce), potentially reaching the 61.80% Fibonacci retracement level ($23.575/ounce) in the short term. Conversely, failure to sustain a break above the SMAs could trigger a move towards the 23.60% Fibonacci retracement level ($22.551/ounce). A break below this level could confirm a bearish trend, potentially targeting the $22.212/ounce and $21.919/ounce support levels.
Summary
The market sentiment surrounding silver is currently mixed. While hopes for Fed rate cuts and Lunar New Year holiday effects offer some optimism, the uncertainty surrounding the CPI data remains a significant hurdle. A breakout above the 50.00% Fibonacci level ($23.259) could signal further gains towards $23.575. However, a breakdown below the 23.60% Fibonacci level ($22.551) could trigger a pullback towards the $22.212.
Sources: TradingView, Trading Economics, Dow Jones Newswire, CNBC, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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