Silver Price Forecast: Powell Looms as $44.08 High Risks $43.20 Reversal
Oil is oversupplied and demand uncertain, technicals are bearish. Traders are in a risk down market.
Quick overview
- Silver rose to $44.08, driven by expectations of US monetary policy shifts and a weaker dollar.
- Traders are awaiting Fed Chair Jerome Powell's speech for insights on potential rate cuts, with a 90% chance of a cut in October.
- While silver's technical indicators show strong bullish momentum, caution is advised due to overbought conditions and potential short-term fatigue.
- Aggressive traders may consider fading strength near $44.00-$44.20, while conservative traders should wait for confirmation before entering.
Silver rose on Tuesday to $44.08 and hit the 1.618 Fibonacci extension as investors weighed US monetary policy shifts and a weaker dollar. The US dollar index (DXY) continued to fall making dollar denominated metals cheaper for global buyers and boosting demand across precious metals.
Traders are waiting for Fed Chair Jerome Powell’s speech at 16:35 GMT for clues on what the central bank will do next. Meanwhile the Fed’s preferred inflation gauge – the US Personal Consumption Expenditures index – is out Friday and will set the tone for the rest of the week.
“Silver’s momentum is being driven by expectations of further rate cuts and a softer dollar,” said Capital.com’s Kyle Rodda. “Inflation risk is still high, so metals are attractive in this environment.” But others warn the market is getting ahead of itself. “The trend is bullish but we could see short term fatigue purely on technical grounds,” OANDA’s Kelvin Wong said.
Fed Cuts and Market Sentiment
Policy divergence within the Fed is creating uncertainty. New Fed Governor Stephen Miran this week said policymakers are underestimating how restrictive current policy is and are pressing for more aggressive cuts to avoid damaging the labour market. His view was countered by colleagues who are calling for caution as inflation remains sticky.
Markets are leaning towards Miran’s side. CME’s FedWatch tool shows a 90% chance of a 25 basis point cut in October and 75% in December. This has been a big support for metals with silver benefiting from safe haven demand and its role as an industrial input in a recovering global economy.
Silver (XAG/USD) Technical Picture: Bulls Strong but Stretched
On the 4 hour chart silver’s rise has been driven by a series of higher lows and strong bullish candles – the three white soldiers pattern often associated with sustained momentum. Silver is holding well above the 50 day moving average at $42.37 and the 200 day is far lower at $38.86 – both showing the dominant trend.
But caution is warranted. The RSI is at 71 – overbought – and recent candles are smaller near resistance. A spinning top pattern around $44 suggests buyers are running out of steam.
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Targets: $44.77, $45.27, $45.52
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Supports: $43.72, $42.96, $42.37 (50-SMA)
A short term trade setup for those looking to trade. Aggressive traders can fade strength at $44.00-$44.20 with stops at $44.80 and targets at $43.20. Conservative traders can wait for confirmation – a bearish engulfing or shooting star – before getting in. Bulls can see any dip to $43.20-$42.90 as a buying opportunity as long as the higher low holds.
In summary
Silver is still bullish but momentum is stretched and Fed uncertainty is looming so the next opportunity may be in a corrective pullback rather than chasing the highs.
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