- Silver picks up on a soft US dollar following US CPI and the market’s take.
- The bond market is priced for a dovish FOMC next week.
- Bears are lurking below the counter trendline resistance.
Silver was ending the North America session bid and 0.85% higher on the day. XAG/USD rose from a low of $27.39 to a high of $28.03. In Asia, the price is flat at $27.99.
The US dollar was pressured despite a strong inflation report as measured by the attest Consumer Price Index for the US economy which led to a bid in the precious metals.
US CPI rose 0.6%, with core up 0.7%, stronger than expected. Also, the US CPI rose 5.0% YoY which was the largest annual gain in more than a decade.
The bond market is pricing for a dovish Federal Reserve next week with the US treasury yields falling for the 3rd consecutive day on Thursday, despite stronger than expected CPI.
The data was arguably in line with the Fed’s ‘transitory’ judgement.
The 2-year government bond yields fell to 0.15%, while 10-year bond yields rose to 1.53% before tumbling down to 1.43%.
‘All in all, strong core data again, but the strength can probably still be viewed as “transitory” to a large extent, due to post-COVID reopening as well as fallout from the semiconductor shortage,” analysts at TD Securities said.
This report, however, has done little to spur up forex market volatility which is at its lowest since the turn of 2020.
The market is of the mind that the data will unlikely to materially change the Fed’s thinking as much of the strength remains confined to reopening-related sectors due to post-COVID reopening.
However, there is always the risk of a less dovish Fed tone next week. This would help to underpin the greenback and weigh on precious metals.
Silver price analysis
Technically, silver is still below the prior dynamic support that is now expected to act as a counter-trendline and resistance while the price is below 28.20.