Signal price

XAG/USD drops 1.0% after ECB, but well within recent ranges ahead of US CPI/Fed meeting

  • Silver fell to fresh weekly lows below its 21-MA after a hawkish announcement from the ECB, but remains within recent ranges.
  • XAG/USD last traded near $21.80, down 1.0% as attention shifts to Friday’s US CPI and next week’s Fed meeting.

Spot silver (XAG/USD) was trading with a negative bias at weekly lows in the $21.80 per troy ounce zone on Thursday, down around 1.0% on the day, at the following a hawkish policy announcement from the ECB which saw the bank signal a 25bp rate hike next month plus the end of QE and a possible 50bp hike in September depending on how the outlook changes of inflation.

But that still leaves XAG/USD well within recent ranges and support in the form of the 21-day moving average at $21.80 continues to hold. Silver is therefore currently near the middle of a $21.50-$22.50 range that has been in play since late May and traders will be eyeing price inflation data at the consumption in the United States on Friday and on the Fed meeting next Wednesday to see if things move.

Silver bulls are hoping Friday’s inflation data will surprise on the downside and reinforce the idea that US inflation has now peaked, which will likely lead to a further reduction in Fed tightening bets. This would weigh on US yields and the dollar, which are generally positive for precious metals.

Meanwhile, the Fed is expected to raise interest rates by 50 basis points at next week’s meeting (and again in July), so that should come as no surprise and hurt silver. What will be more important is Fed Chairman Jerome Powell’s comment at the post-meeting press conference on the outlook for rate hikes beyond July.

If it’s starting to look a bit more confident that inflation will fall back from current high levels / concerned about the weakening US economy, then that, if the CPI also surprises on the downside, could help the XAG/USD to rally back to the $23.00-$23.50 area, where it would encounter resistance in the form of its 50- and 200-day moving averages.