Key Points:
- Markets are pricing in a 15% chance of a hike.
- Jawboning likely following the decision.
- Fed likely to hold rates steady at 0.50%
Silver has had a relatively strong few weeks with the embattled metal climbing back out of the doldrums to form new weekly highs around the $17.17 mark. However, the concerted rally price action is nearing a critical juncture that could see it under pressure in the coming session.
A cursory review of the technical indicators for the precious metal clearly highlights the current juncture that the pair faces. The recent rally has taken price action towards a relatively robust area of resistance that could potentially spoil the bull’s current plans. In addition, the RSI Oscillator is also firmly within oversold territory suggesting that there is building pressure for a downside correction. The stochastic oscillator also supports the contention that a potential pullback could be afoot.
Subsequently, the most likely scenario for the next few days is a failed breach of resistance, at the $17.22 mark, which is then followed by a relatively rapid pullback towards support at $16.55. However, given some of the volatility currently sweeping global markets, the road lower could be relatively rocky indeed.
Fundamentally, there is still plenty of demand for physical silver in both the bullion and industrial markets. However, much of the recent demand increases have not flown through to the derivative markets and we are still seeing silver, and gold for that matter, at historically depressed prices given the overall expansion in the underlying money supply.
Ultimately, the metal is likely to return to its long term bearish trend in the coming session as the pair fails to assail the near term resistance. Given the extent of the RSI Oscillator’s overbought status, the likely move over the next 24 hours is down and it’s probable that the metal will continue to move lower until it reaches support around the $16.55 mark. Subsequently, keep a close watch on the metal for short opportunities in the near term.