Silver price confined to $29.8-$30.45 range ahead of Fed's decision
Yesterday silver rebounded to $30.45
Silver's price action this week has been a tightrope walk between critical support and resistance, with the Federal Reserve's interest rate decision today poised to tilt the scales.
After breaking out of an ascending channel, the metal has flirted with a significant support level at $29.8, testing it twice without a decisive break. Yesterday, silver rebounded to $30.45, where it met resistance at the 50-day EMA, and currently trades at $30.3 during the European session on Wednesday.
The Federal Reserve's stance on interest rates today will be a major determinant for silver. The central bank is expected to maintain its benchmark rate at the current 4.25%-4.5% range, consistent with December's indication from Fed Chair Jerome Powell of fewer rate cuts in 2025 than previously anticipated.
While this suggests a steady policy, the real intrigue lies in the post-decision press conference. Here, investors will seek clues about the Fed's reaction to Trump's administration policies. A more reserved, wait-and-see approach by the Fed might strengthen the U.S. Dollar, putting downward pressure on the white metal.
Silver price dynamics (December 2024-January 2025). Source: TradingView.
U.S. monetary policy to shape silver price action dynamics
Technically, silver has been confined within a narrow trading range, with $30.45 acting as a ceiling due to the 50-day EMA and $29.8 as the floor. The daily Relative Strength Index (RSI) offers little clarity, hovering in a neutral zone, not committing to either bullish or bearish momentum. This lack of directional signal from the RSI suggests that silver's next move might be heavily influenced by external economic cues, particularly the Fed's commentary.
In essence, silver's immediate future hangs in balance. If the Fed's tone is dovish or hints at future rate adjustments, this could weaken the dollar, potentially propelling silver prices upward. However, a hawkish or neutral stance could reinforce the dollar, capping silver's upward potential. Investors are thus at a crossroads, with silver's price action likely to reflect broader market reactions to U.S. monetary policy more than its price action dynamics for the time being.
Silver prices fell below $29.80 after breaking out of an ascending price pattern. The metal's decline was exacerbated by rising U.S. Treasury yields and inflation concerns.
