Silver Prices Forecast: Trader Reaction to $27.06 Sets the Near-Term Tone

Silver Market Overview

Silver prices are edging higher on Thursday as the US dollar weakens, drawing attention from traders. This movement comes as the market anticipates key US economic data that could influence the Federal Reserve’s interest rate decisions. A decrease in the dollar index by 0.2% against a major currency basket is enhancing the appeal of dollar-priced silver for international buyers.

At 10:10 GMT, Silver (XAG/USD) is trading $27.36, up $0.19 or +0.71%.

Anticipated Economic Data

This week, investors are closely watching several crucial economic indicators. The US gross domestic product (GDP) for the first quarter is projected to have expanded by 2.4%, according to surveys. Additional economic reports include weekly initial jobless claims and the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation metric. These figures are expected to play a significant role in shaping the Federal Reserve’s forthcoming policy actions.

Market Sentiment and Expectations

Current market sentiment, as indicated by CME Group’s FedWatch tool, does not foresee changes in interest rates at the upcoming Federal Reserve meeting. However, investors are vigilant for any indications of potential rate cuts later in the year. Moreover, silver prices have recently corrected, influenced by profit-taking activities and decreased geopolitical tensions.

Short-Term Outlook for Silver

The immediate direction for silver prices hinges critically on the forthcoming US economic data releases. Should the core PCE index align with or fall below expectations, it could lead to a further weakening of the dollar, potentially driving silver prices upward. Conversely, if inflation data exceeds expectations, silver may encounter downward pressures, prompting a more aggressive stance on interest rates by the Fed.

In summary, while the silver market currently shows cautious optimism boosted by strategic Asian purchases and a weaker dollar, the near-term outlook remains heavily dependent on upcoming US economic reports and Federal Reserve policy directions. Traders should prepare for possible increases in silver prices, contingent on favorable economic outcomes and stable interest rate forecasts.

Technical Analysis

The short-term trend is down, but the intermediate and long-term trends are pointing decisively higher.

The short-term range is $24.33 to $29.80. Its 50% level at $27.06 is currently being tested as traders try to establish a new support zone. Taking out this week’s low at $26.66 could trigger an acceleration into the 50-day moving average at $25.32.

The minor range is $29.80 to $26.66. A strong short-covering rally could drive prices into its 50% level at $28.23.

Based on the current price action, trader reaction to $27.06 will determine the near-term direction.