- Silver price is under pressure as traders await Fed.
- US CPI was mixed and Silver turns lower and eyes key support.
The Silver price was offered on Tuesday. Silver sold off following a mixed inflation report from the US and ahead of the Federal Open Market Committee's interest rate decision, statement, projections and Chairman Jerome Powell's press conference on Wednesday. At the time of writing, XAG/USD is trading down some 1.60% after dropping $24.407 to a low of $23.668 so far.
Silver was sold off when traders noted the implications for sticky core inflation in the US. While the US Consumer Price Index edged up 0.1% last month after increasing 0.4% in April, core CPI increased 0.4% in May, rising by the same margin for the third straight month. The Greenback pared back initial knee-jerk losses as this is a number that is too high to be compatible with the Fed's 2% inflation target, thus there are still chances that the FOMC will justify another 25-bp rise at the outcome of the FOMC meeting. Nevertheless, the money markets are pricing in a 95% chance the US central bank will decide to forgo an 11th straight interest-rate hike and keep the benchmark rate at 5.00% to 5.25% on Wednesday. Moreover, the rate futures market also trimmed bets on a Fed rate hike in July following today's CPI report.
''With core CPI/PCE prices and other underlying inflation measures still not showing significant progress ahead of the June FOMC meeting, we remain of the view that a final 25bp rate hike to 5.25%-5.50% remains on the table,'' analysts at TD Securities argued. ''In our view, if the hard data points to an economy that remains strong enough to make the Fed signal a likely rate hike for July, perhaps it is more optimal to go now.''
Silver technical analysis
The weekly chart shows the market being rejected at a 50% mean reversion after a move to test the neckline of the M-formation. This leaves prospects of a break of the middle structure's low of the current three candles at around $23.25 to confirm a bearish bias. This will leave the support line vulnerable to a test in due course.
The daily chart's swing low at $23.25 is indeed a key level on the downside guarding support areas lower down towards the weekly trendline support:
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