Silver quotes continued their decline and by the end of the last week were in the 23-23.4 range. These levels were strong support for silver in December and January, and now buyers are trying to organize a bounce upwards from here. Technical indicators confirm the reversal, and with the support of the fundamental background silver quotes can quickly return to the level of 24.65.
Jerome Powell provided a significant support for the rebound in silver prices. Speaking at the Fed's research conference, the chairman of the U.S. financial regulator expressed doubts about the need for more interest rate hikes due to uncertainty about the consequences of past hikes. Powell's comments caused a decline in U.S. Treasury bond yields, which was a favorable factor for the rise in silver and other commodity prices.
Today market participants will be focused on the meeting between President Joe Biden and Republican House Speaker Kevin McCarthy to discuss the debt ceiling. Traders will also form their positions ahead of publication of the U.S. PMI on Tuesday and the Federal Open Market Committee (FOMC) meeting minutes in May on Wednesday.
Meanwhile, UBS economists believe that the bullish scenario for the commodities market remains. This position is supported by growing demand from China's economic recovery and unresolved problems on the supply side. A weaker dollar, low reserves and remaining risks to commodity production should also support prices. UBS remains forecasting total returns for commodities at around 20% over the next 12 months.
From the technical point of view, silver prices have already reached the 23.6% (24.65) and 38.2% (23.75) Fibonacci levels during the current correction. The Stochastic indicator entered the oversold zone for the first time since the middle of March, and then reversed and gave a buy signal. Now the main short-term target for the silver price is a return to 24.65.
The following trading strategy option can be suggested:
Buy silver in the 23.6-23.9 range. Take profit – 24.65. Stop loss – 23.