Silver plunged to a three week low, what next?

Silver prices witnessed a speculative plunge yesterday. Prices dropped by 3.80%, its biggest intraday fall after 7 March 2023. As data from the United States showed that inflation is cooling down. While the labor market commences easing amidst US Federal Reserve (Fed) officials complaining about its tightness. Further, the BOE policy decision also weighed on sentiments. Treasury bond yields drop, but the US Dollar (USD) rises to new weekly highs.

The dollar sparked after recent jobless claims data strengthened the case for the Federal Reserve to halt interest rate hikes. But kept a high bar for a year-end cuts. The dollar index, which tracks the U.S. currency against six major peers, was at 101.92, up 0.7%

The number of Americans filing new claims for jobless benefits jumped last week to the highest level since late 2021. Suggesting that higher interest rates were starting to weigh on the labor market. US initial jobless claims stood at 264K versus 245K estimate

U.S. producer prices, on the other hand, showed a moderate rise last month. Posting the smallest annual increase in producer inflation in more than two years, further evidence that inflation pressures were easing.

 The producer price index for final demand rose 0.2% last month. In the 12 months through April, the PPI increased 2.3%. That was the smallest year-on-year rise since January 2021 and followed a 2.7% advance in March.

Furthermore, GBP/USD initially fell following the BoE’s announcement of its decision to raise interest rates by 0.25% bringing the Bank Rate to 4.50%. 

Dovish opening remarks from the BoE’s Chairman Andrew Bailey further weighed on the pair. After he said the committee had good reason to believe headline inflation would fall considerably from April onwards.

 The Pound Sterling recovered later during Bailey’s press conference. However, when he emphasized secondary effects and how “risks to inflation continue to be skewed to the upside as secondary effects persist”.

Technical View

 Silver witnessed its biggest intraday fall since 7 March 2023. Prices dropped down by 3.76% and settled at 73808 from previous day’s close of 76688.00

Formation of a long bearish candlestick on the daily chart is indicating a strong selling pressure on the higher side.

Now on the downside, 73700 will act as a crucial support, and a break below it will show further fall. Silver prices may test 72900-72550 next support. Else, any rise towards 74800-75200 could attract selling pressure.

On the upside, immediate resistance is seen at 75420 a break above only will expect to test immediate resistance 76000-76400.