Silver price breaks and retests ahead of US inflation data

Silver price has drifted upwards in the past few days as investors react to the falling US dollar index (DXY). The precious metal’s price rose to a high of $23.34, the highest level since June 20th. It has risen by over 5% from the lowest level in June.

US inflation and China slowdown

Silver prices have rebounded in the past few days as investors assess the next actions of the Federal Reserve and China’s recovery. Data published on Friday showed that America’s non-farm payrolls (NFP) rose by 209k in June, lower than the median estimate of 230k.

The unemployment rate dropped slightly to 3.6% in June while wage growth has held quite steady. With the jobs numbers done, the next important data to watch will be the upcoming US consumer inflation data.

Economists believe that the headline consumer price index (CPI) dropped to 3.1% in June from the previous 4.0%. America’s inflation peaked at 9.4% in 2022. The closely-watched core inflation is expected to drop to 5.1%.

Federal Reserve officials expect that the bank will continue hiking interest rates in the coming meetings. Expectations are that the bank will hike by 0.25% in its July meeting. This view was confirmed by several Fed officials like Loretta Mester, Mary Daly, and Raphael Bostic.

Silver price also recovered as investors react to the softening Chinese economy. Data published on Monday showed that the headline consumer price index (CPI) dropped to zero in June. This is a sign that the country’s economy is not doing well.

China plays an important role in silver and other commodities since it is the biggest buyer. As such, a slowing economy could have a negative impact on prices in the near term.

Silver price technical analysis

XAG/USD chart by TradingView

The daily chart shows that the XAG/USD has been in a strong bearish trend in the past few months. It has crashed by more than 10% from its highest level this year, meaning it has moved into a correction zone. 

Silver has dropped below the lower side of the Andrews Pitchfork tool. It has also retested this level in what is known as a break and retest pattern. Silver price has dropped below the 50-day and 25-day moving averages and the 23.6% retracement level.

Therefore, the outlook of silver prices is bearish, with the next support level to watch will be at $22.12, the lowest point on June 23rd.

The post Silver price breaks and retests ahead of US inflation data appeared first on Invezz.

dollar
silver
inflation
commodities
reserve
interest rates
fed
us dollar