Yesterday, the silver price took out last week’s low and triggered a sell signal in line with our outlook. This marked the resumption of the bearish trend and I would expect price to reach its yearly low of $13.95 as long as we trade below the November 12 high of $14.48.
The main driver of this decline is higher U.S. yields and a stronger Dollar, with the specific trigger behind the latest slide being an unexpected rise in U.S. headline inflation. Inflation rose by 0.2 percent year-on-year vs. an expected outcome of 0.1 percent (Bloomberg News survey). Traders not short will most likely sell on a bounce to the $14.24 to $14.33 range, with stops above $14.48.
I would also expect an acceleration of the bearish trend on a break of yesterday’s low of $14.09.
Gold price is slipping below its yearly low in yesterday’s trading session helps to strengthen our bearish case. The current fair value price for silver is at $14.01 according to the current gold price. Also adding to our bearish summary is the EURUSD sliding to new lows as the Fed looks to hike and the ECB looks to cut rates.
FOMC On Tap
The biggest risk to a bearish outlook in today’s session is the latest Fed rate meeting minutes. A pullback in price may occur if the tone of the minutes are perceived as bearish, which is something that we don’t see as being likely at this point. The Fed must make a full 180 degree turn for traders to back off from a potential rate hike, or the U.S. data must turn significantly soft over the coming weeks.
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
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