Silve rallied to $61.75 on Wednedsday before hitting a wall. With key economic announcements scheduled for the United States, some traders are looking to see if the recent bounce in silver prices will continue.
A bounce is a temporary move higher within the confines of a trend. The only way to know for sure if a trend has changed will be to see if inflationary pressures ease, and whether that leads to lower prices for silver. Until then, we won’t know for sure.
Silver Support and Resistance Levels
According to the supplied chart, the first-level support is at $60.30, followed by $60. Resistance is between $62.20 and $62.25. The 4 hour chart’s 200 period EMA is at $64.28.
Support and resistance levels are guides to understand market activity. In general, the presence of supply and demand at that level is unknown. Support is level where demand is thought to be present and therefore is potential buying. Resistance is present where market participants are thought to be selling and therefore is potential supply.
Improving (bullish) demand is shown by a break and close above the resistance level. A spike, or temporary move above the level, does not provide evidence of improving demand.
Likewise, a break and close of support is required to show potentially bearish market activity. A close below support is not sufficient.
Traders should also be consistent about the timeframe of charts used. EMAs computed using different timeframes (i.e. 4 hour, vs daily) represent different data.
US Inflation Data Adds Event Risk
Personal income and spending data for August, as well as the final estimate of second-quarter GDP, will be released on September 30, according to the latest schedule of releases by the U.S. Department of the Treasury. All releases are scheduled for 8:30 a.m. Eastern time.
The PCE price index measures different kinds of inflation at the expenditure level. In July, the index reported that prices rose by 3.7% over the same month the previous year.
- The index warrants attention for four things.
- First, the month over month change. Falling prices indicate deflation.
- Second, the year over year change. From the second month over, prices can rise.
- Third, the level of spending. Spending reports give information about the demand side of the economy.
- Fourth, revisions. Revisions to previous months can change the overall trend.
The focus of the report, however, will be the overall change.
RSI Explains Momentum, Not Certainty
With the reported relative strength index at around 35, here’s a look at price momentum for silver. The relative strength index, ranging from 0 to 100, shows the speed and impact of the price change.
In the case of silver, a reading below 30 indicates the price is oversold. A reading above 70 indicates the price is overbought. Readings at or near these levels do not always indicate reversals.
Incorporating trend analysis with the RSI can help identify potential turning points. An RSI reading that improves and trend line support is crossed would provide more evidence of an uptrend than just the improvement in the RSI.
Conclusion
If the direction of silver’s rebound is to be sustained, it requires further buy orders. Economic statistics are likely to impact sentiment, but negative costs of bearish speculation would be validated by a sell order that yields a reversion of the temporary price appreciation. Not all market participants are lined up to trade silver at the new price.
Arslan Ali Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.
His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.