Silver bears are looking to engage again

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  • Silver prices have been dented on US dollar strength.
  • Bears looking for downside extension from resistances.

XAG/USD is trading down nearly 2% on the day after falling from a high of $27.69 to a low of $27.01.

The US dollar is back on form with US Treasury yields that climbed on Wednesday.

The DXY index is up 0.65% trading near the highs of 90.7950. This has followed the 10-year note hitting its highest level in a month.

A much stronger than expected reading on consumer prices earlier have heightened worries the economy may be heading towards a sustained period of higher inflation.

Meanwhile, the US Labor Department said the consumer price index surged 0.8% in April, its largest rise since June 2009, after rising 0.6% in the prior month.

The “core” reading, which excludes the more volatile food and energy portions, jumped 0.9%. Expectations called for overall CPI to rise 0.2% and the core reading to climb 0.3%.

The yield on 10-year Treasury note climbed as high as 1.697%, its highest since April 13 and on pace for its biggest one-day basis point increase since March 18.

Precious markets will note that the US Federal Reserve has repeatedly stated that it views any inflation to be transitory in nature.

On the same day as the CPI data, the Fed’s Vice Chair Richard Clarida said it will be “some time” before the US economy is healed enough for the Federal Reserve to consider pulling back its crisis levels of support and he expects the rise in prices to be temporary.

Silver technical analysis

The price has made a 38.2% Fibonacci retracement of the prior daily bearish impulse. 

From this juncture, the bears could start to engage, but there is a note worth confluence of the 61.8% Fibo and prior support above which could well be tested by the bulls.

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