Global factors will help silver to overcome chart pattern resistance

15 January 2024 100
Global factors will help silver to overcome chart pattern resistance

On Monday, silver prices continue their second straight session of gains as tensions in the Middle East increase. At the same time, last week's US producer price data reinforced the trend of expecting the Federal Reserve (Fed) to cut rates soon.


The US and UK conducted air strikes against Houthi forces in response to multiple attacks on ships in the Red Sea. In times of political and economic uncertainty, precious metals rise in price, becoming safe haven assets.


Meanwhile, data showed an unexpected decline in US producer prices in December. This led to a decrease in bond yields. Against this background, expectations of monetary policy easing increased.


According to CME FedWatch, the US Federal Reserve will keep its policy rate unchanged at the meeting on January 30-31. However, the probability of a rate cut by the US central bank in March is now estimated by traders at 78%. A week ago, this indicator was 10% lower.


Meanwhile, Atlanta Federal Reserve President Raphael Bostic said inflation could accelerate if interest rates are cut too early.

As Seeking Alpha analysts note, silver producers' margins have shrunk markedly over the past few years due to a decline in the metal's price and rising costs. However, in the medium term, it might increase if disinflation continues and prices recover due to the Federal Reserve's softer monetary policy.


Thus, according to Seeking Alpha experts, medium-term prospects of silver are positive. Silver will also be supported by the growth of industrial demand, as silver plays an important role in the production of batteries and solar panels.


Silver quotes are in a broad correction on the D1 timeframe.


On H4, a chart pattern is forming a rectangular triangle with a downward slope. Divergence of Relative Strength Index (RSI) indicator (standard values) is detected, foreshadowing a possible change in the direction of silver price movement towards growth and exit from the graphical formation.


Signal:

The short-term outlook for Silver is to buy.

The target is at the level of 25.550.

Part of the profit should be fixed near the level of 24.450.

A Stop-loss should be placed at the level of 21.600.

 

The bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.

 

This content is for informational purposes only and is not intended to be investing advice.

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