Last week, silver prices stopped their decline which lasted since mid-April. The price found solid support at the level of 26, with higher demand from the buyers of the white metal. At the start of Monday's trading session, the bulls increased the pressure triggering a strong rebound in silver. The first target of the upward movement is at 27.5, and the prices failed to consolidate above this level late last month.
Besides the technical picture, fundamental factors also contribute to the recovery of silver prices. In particular, financial market participants positively assessed the US labor market report for April. The released data were worse than analysts' expectations, but in the current environment it has a favorable impact on the value of risk assets. Silver prices had a poor response to the US statistics on Friday and are now catching up.
The Bureau of Statistics of the US Department of Labor reported the creation of 175,000 new jobs in April. The market consensus forecast suggested 243,000, but instead the actual data turned out to be the lowest in six months. In addition, wage growth rates dropped below 4% for the first time since June 2021. Joe Brusuelas, Chief Economist at RSM, highlighted a favorable trend of labor market cooling, which will help to avoid stagflation.
Commenting on the US Department of Labor's monthly report, JPMorgan Chief Economist Michael Feroli voiced his support for the Fed's imminent monetary policy easing. Market participants are now expecting the first rate cut in September, but Feroli is encouraging the US regulator to start cutting as early as July. According to him, if May and June statistics confirm a slowdown in wage growth and lower hiring, the Fed will ease its stance before the pause in August.
The RSI indicator has approached the oversold zone on the daily chart of silver and is ready for an upward reversal. This signal will increase the likelihood of further rise in prices of the white metal to the level of 27.5.
Consider the following trading strategy:
Buy silver at the current price. Take profit – 27.5. Stop loss – 26.5.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion
This content is for informational purposes only and is not intended to be investing advice.
