Silver price skyrockets after finding support at $19.66
- Silver printed Higher Low and Higher High in previous wave
- Growth in China, the largest consumer of silver, slowed down in last quarter
- Price of white metal may surge up to 20.83, a triple confluence zone
- Investors are cautious ahead of FOMC meeting later this month
Silver price XAG/USD was closed in negative territory around $19.75 per ounce on Wednesday however $19.66 support worked for white metal and we saw a sharp spike in price today.
Precious metal is being traded at $20.18 in the US morning session; immediate support is seen around $20.12-$20.00 where a number of moving averages are currently sitting in. A break below this support zone may target $19.80, 55 DMA, and then $19.66, 23.6% fib level.
On upside, resistance may be noted at $20.30, 38% fib level ahead of $20.66, 100 DMA and then $20.83 to $20.97, 50 fib level and 200 DMA.
The white metal had posted Higher Low (HL) and Higher High (HH) in previous daily wave which is a perfect example of Bullish Trend according to typical swing pattern.
Thus the ongoing rally in silver should halt around $20.80-$21.00 which is a triple confluence zone of moving averages and 50% fib level as shown in above chart. A rebound from 20.80-21.00 will print another Higher High (HH) thus signaling the continuity of bullish momentum.
So in light of above mentioned price action signals selling silver around $20.83 with a final target around 19.85 can be a good move, stop loss should be placed at $21.05.
Earlier this week we saw a rapid fall in bullion price after China’s last quarter growth remained below expectations, moreover industrial production also slowed down in Asia’s largest economy. China is the biggest consumer of precious metals, thus growth concerns about Asian nation kept gold and silver under pressure.
It is to be noted that moments ago the US labor department released figures about continuing jobless claims till Jan 11, the data was worse than expectations. Analysts had predicted 2.930 million claims this time around; however actual figure was 3.056 million. The report has fueled the bullish momentum in Silver.
It is also pertinent to mentioned here that the fate of Federal Reserve’s unprecedented asset purchase program is linked to performance in labor market. In December, the US central bank recognized recent improvement in labor market and consequently trimmed monthly purchases of bonds by $10 billion.
Earlier this month the US labor department said that jobless rate had reached 6.7% in December, a level which is very close to Fed forward guidance threshold. Due to concrete progress in employment sector during December, many analysts now believe that more trimming in monthly bond purchases is very likely in FOMC forthcoming meeting which is due to be held on 28-29 January.
Minutes from FOMC last meeting revealed very hawkish monetary policy stance in policymakers. More tapering in January will significantly increase selling pressure in Silver price because the value of US dollar is negatively correlated with stimulus.
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