The technical outlook for silver prices may have turned short-term bearish as price has repeatedly failed to breach the January 7 high of 14.58 (closing price). A pullback to the support area of 14.21-14.27 looks likely, however, I would not trade this corrective move, instead focusing rather on being bullish from the 14.21-14.27 range, as the overall trend is bullish above the January 22 low of $14.
As long as $14 holds as a support level, I would expect prices to reach $14.58 and $14.90.
The $14.90 target can be motivated by silver being too soft in relation to gold. Our simple fair-value model based on gold prices and six months of data, suggests that silver should be trading at $14.88, as long as gold prices remain above $1119.
Dovish Fed Supports Silver Prices
The Fed struck a dovish tone in yesterday’s FOMC meeting and is primarily concerned about the economy. They are prepared to give it some time for the economy to heal and for external pressures (such as in emerging markets) to abate. This is keeping interest rates and the USD in check and represents two key drivers for silver prices and other metals. Economists are now suggesting that a rate hike in March carries a low probability and are instead eyeing a possible raise in June.
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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
— Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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