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Silver Prices Trade Sideways Ahead of U.S. CPI

Silver Prices Trade Sideways Ahead of U.S. CPI

Alejandro Zambrano, Market Analyst

Talking Points

  • Silver prices trade sideways in a relatively wide range.
  • A support level below the lower end of the current range of $16.78 – $17.56 is the psychological level of $16.50, while a resistance level above the May 11 high of $17.56 is the May 5 high of $17.70.
  • Today’s U.S. Inflation report and Industrial Production figures may provide clues about possible future Fed monetary policy action.

Silver prices were little changed at the time of writing and stayed firmly trapped between the April 25 low of $16.78 and the May 11 high of $17.56.

As long as price is trapped in a range, traders tend to have a low tendency to take action, as price does not have a clear direction. Consequently, it is common for the range to narrow further and wait for a breakout. On a breakout occurring, it may be the start of a new trend, especially if macro fundamental news triggers the break.

Support levels below the lower end of the range, are the psychological level of $16.50, followed by the March 18 high of $16.30. Resistance levels above May 11 high of $17.56 are the May 5 high of $17.70, followed by the May monthly high of $17.99.

Silver Price | CFD: XAG/USD

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

Potential market moving events in today’s session are U.S. Inflation and Industrial Production. Headline inflation may rise by 1.1% YoY from 0.9% in March, while the Core Inflation annual growth rate may decline to 2.1% from 2.2% as per a Bloomberg News survey. The trends of these series are important as rising inflation readings may force the Fed to hike rates over the next 12 months; this may support a stronger dollar and thereby weaken silver prices. The opposite is also true: a slower pace of inflation may reduce the demand for the USD.

U.S. Industrial Production may rise by 0.3% MoM, which follows a contraction of 0.6% in March according to a Bloomberg News survey. Since last year, Industrial Production contracted by 2.0% in March, which is the same annual growth rate as in November, while the low of the current downtrend is the December growth rate of -2.30%.

A lower growth rate than projected in the Bloomberg News survey, suggests that Industrial Production is doing less good than expected and is thereby potentially hinting at lower U.S. GDP growth. The last official U.S. GDP report showed a growth of 1.9% YoY, which is lower than the 2.9% growth rate when Industrial Production peaked near 3.9% YoY in the latter half of 2014.

Our forecasts for Q2 2016 are live on the site. Download them for free.

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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