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Silver Price Forecast: XAG/USD bounces back above $29 with US Inflation under spotlight
398752 June 27, 2024 22:29 FXStreet Market News
- Silver price rebounds strongly from $28.60 as the US Dollar corrects.
- US price pressures are expected to have slowed in May.
- Fed Bowman sees no rate cuts this year.
Silver price (XAG/USD) recovers sharply from a six-week low of $28.60 in ThursdayÂ’s New York session. The white metal rises to near $29.20 as the US Dollar (USD) extends its correction amid caution ahead of the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for May, which will be published on Friday.
The US PCE report is expected to show that core price pressures grew at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to have decelerated to 2.6% from 2.8% in April.
The scenario in which price pressures decline, as expected or more than that, would boost expectations of early rate cuts by the Fed. Currently, financial markets expect that the Fed will start reducing interest rates from the September meeting and will deliver subsequent rate cuts in the November or December meeting. On the contrary, hot inflation reading would be favorable for the US Dollar and bond yields.
Meanwhile, Fed policymakers continue to argue in favor of maintaining interest rates at their current levels to bring down inflation to 2%. On Wednesday, Fed Governor Michelle Bowman pushed back rate-cut prospects and warned of more rate hikes if disinflation inflation appears to be stalling or reversing.
Silver technical analysis
Silver price trades in a Falling Channel chart pattern in which each pullback is considered as selling opportunity by market participants. The white metal trades below the 200-period Exponential Moving Average (EMA), which trades around $29.45.
The 14-period Relative Strength Index (RSI) returns into the 40.00-60.00 range from the bearish trajectory of 20.00-40.00, suggesting that a downside momentum is over.
Silver four-hour chart
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal ReserveÂ’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
US Dollar eases after Durable Goods orders come to a halt
398750 June 27, 2024 22:29 FXStreet Market News
- The US Dollar trades in deep red against nearly all major peers.Â
- The data dumpt with US GDP, Durable Goods, and weekly Jobless Claims did not go down well with markets.Â
- The US Dollar index says goodbey to 106.00 and heads lower.Â
The US Dollar (USD) falls and in the process is erasing all gains from past Wednesday. The big batch of data points that came out made traders cherry pick which elements they would take for their assessment on where to position the US Dollar. Elements such as the uptick in Continuing Claims, the soaring Wholesales Inventory number and the flat fall of Durable Goods was enough to send the US Dollar lower.Â
On the US economic calendar front, all data is out of the way and markets will now be on the lookout for the Federal Reserve’s preferred inflation Gauge: the Personal Consumption Expenditures on Friday. Should those fade as well, as a sign of further disinflation, markets might challenge the current hawkish stance of the Fed with a weaker US Dollar at hand. That would mean in the US Dollar Index, that a fall back to 105.00 or lower could be in the cards.Â
Daily digest market movers: Consumer signals end of the line
- At 12:30 GMT, nearly all important data points were released for this Thursday:
- US Gross Domestic Product for the third quarter:
- Headline GDP grew at an annualized rate of 1.4%, more than the 1.3% previously estimated.
- GDP Price Index remained stable at 3.1%.
- The Headline Personal Consumption Expenditure Price index went from 3.3% to 3.4%, while the core reading also ticked higher from 3.6% to 3.7%.
- US Durable Goods for May:
- Headline Durable Goods orders fell flat to 0.1%, from a revised 0.6% to only 0.2%.
- Durable Goods without Cars and Transportation missed estimates and fell lower from 0.4% to -0.1%.
- Weekly Jobless Claims for the week ending June 14th:
- Initial Jobless Claims came in stronger, from 238,000 to 233,000..
- Continuing Claims were an issue, as they jumped from 1,821,000 to 1,839,000.
- Pending Home Sales for May declined for a second week in a row, this time by 2.1%, signaling more issues at hand for the US housing market.
- US Gross Domestic Product for the third quarter:
- At 15:00 GMT, the Kansas Fed Manufacturing Activity Index for June will be released. The previous print was at -1.Â
- Equities are trying to snap the negativeness for this week with US equities soaring after the US data numbers with the idea the Fed’s hawkish stance is a touch overdone.Â
- The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 56.3% for a 25-basis-point cut. A rate pause stands at a 37.7% chance, while a 50-basis-point rate cut has a slim 6.0% possibility.
- The US 10-year benchmark rate trades near the weekly high at 4.28%.
US Dollar Index Technical Analysis: PCE to unlock more weakness?
The US Dollar Index (DXY) has been strolling through markets with a big thanks to some outside effects. Although for now the near support level at 105.89 looks to be holding, expect with the mixture of data this Thursday and Friday to cause some whipsaw moves. Rather look for the dust to settle late Friday to see where the US Dollar will be heading once a clear picture has been revealed.Â
On the upside, the biggest challenge remains 106.52, the year-to-date high from April 16. A rally to 107.35, a level not seen since October 2023, would need to be driven by a surprise uptick in US inflation or a further hawkish shift from the Fed.Â
On the downside, 105.53 is the first support ahead of a trifecta of Simple Moving Averages (SMA). First is the 55-day SMA at 105.27, safeguarding the 105.00 round figure. A touch lower, near 104.70 and 104.46, both the 100-day and the 200-day SMA form a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation.Â
US Dollar Index: Daily Chart
Interest rates FAQs
Oil: DOE reports increase in crude inventories – TDS
398749 June 27, 2024 22:26 FXStreet Market News
Oil markets are holding steady despite the surprise increase in crude inventories reported by the U.S. Department of Energy (DOE), TDS analysts note.
Weaker demand and a large inventory weigh on prices
“Systematic flows have eased in WTI, but Brent crude could still see funds look to add +7% of their max historic position if prices can hold above $85.99/bbl.”
“Elsewhere, weaker demand statistics and a large inventory build in gasoline, bucking the typical seasonal pattern heading into summer driving season, has prompted Commodity Trading Advisors (CTAs) to turn heavy sellers in RBOB gasoline.”
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Fed’s Bostic: Interest rate cut likely in Q4
398748 June 27, 2024 22:17 FXStreet Market News
Atlanta Federal Reserve President Raphael Bostic said on Thursday that an interest rate cut in the fourth quarter was likely, with inflation moving in the right direction, per Reuters.
Key takeaways
“Penciled in four quarter-percentage-point rate cuts for 2025, Fed is on a long term arc.”
“Want to be absolutely certain inflation will return to 2% before an initial cut that should be seen as the first in a series; that is a reason for patience.”
“Inflation remains chief concern, businesses say they see no cliff’ ahead for the job market.”
“Fed can achieve 2% inflation with a job market that remains tight by historical standards.”
“Service businesses say pricing power is eroding.”
“Housing costs are a frontline conversation, though he remains confident shelter inflation will fall back into line.”
“Labor market is loosening but it’s not loose.”
“GDP and job market data point to orderly deceleration in activity that will balance supply and demand, lower inflation.”
Market reaction
These comments failed to trigger a noticeable reaction in the US Dollar (USD). At the time of press, the USD Index was down 0.26% on the day at 105.77.
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Copper nets shorts see growth – TDS
398747 June 27, 2024 22:12 FXStreet Market News
Top traders in Shanghai continue to liquidate their long positions in Copper seeing their net short position grow Thursday overnight, TDS commodity strategists note.
Selling trigger continues to drift closer to market
“Commodity Trading Advisor (CTA) long positions remain safe, however as momentum eases the selling trigger continues to drift closer to market at $9,385/t. Indeed, our gauge of global commodity demand continues to weaken, while depressed premiums and surging inventories in the Middle Kingdom argue against fundamental tightness.”
“This contrasts with the euphoric positioning in the West that has been driven by the narrative of upcoming greenification demand and large deficits.”
“While the fundamental situation certainly looks promising in the years to come, the lack of evidence supporting current physical tightness has started to see the money manager positioning unwind. With plenty of bloated positions still remaining, the Red Metal remains at risk in the near-term.”
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Breaking: VanEck files for Solana ETF in the US
398746 June 27, 2024 22:10 FXStreet Market News
Global investment management firm VanEck has filed for a new Solana (SOL) exchange-traded fund (ETF) in the US, the firm’s head of digital assets research, Matthew Sigel, said on Thursday in its official Twitter account.
I am excited to announce that VanEck just filed for the FIRST Solana exchange-traded fund (ETF) in the US.
Some thoughts on why we believe SOL is a commodity are below.
Why did we file for it?
A competitor to Ethereum, Solana is open-source blockchain software designed to… pic.twitter.com/XwwPy8BXV2— matthew sigel, recovering CFA (@matthew_sigel) June 27, 2024
Developing story, please refresh the page for updates
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USD/CAD Price Analysis: Continues to face pressure near 1.3700
398744 June 27, 2024 22:09 FXStreet Market News
- USD/CAD declines from 1.3700 as the US Dollar slumps ahead of the US core PCE inflation reading.
- US Durable Goods Orders barely rose in May.
- The Canadian economy is estimated to have expanded by 0.3% in April.
The USD/CAD pair drops in an attempt to break decisively above the round-level resistance of 1.3700 in ThursdayÂ’s New York session. The Loonie asset edges lower as the US Dollar (USD) corrects with focus on the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday.
Investors will pay close attention to the underlying inflation as it will provide fresh cues on the interest rate outlook. Soft inflation figures would boost expectations of early rate cuts by the Federal Reserve (Fed) while hot numbers will diminish them.
In the American session, the US Dollar has come under pressure despite the US Durable Goods Orders surprisingly rose for May. Fresh orders for durable goods expanded by 0.1%, while economists projected a decline at a similar pace.
Meanwhile, the next move in the Canadian Dollar will be forecasted by the monthly Gross Domestic Product (GDP) report for April. The report is expected to show that the Canadian economy expanded by 0.3% after a stagnant performance in March.
USD/CAD tests the breakout region of the Falling Channel chart pattern formed on an hourly timeframe. A breakout of the above-mentioned chart formation results in a bullish reversal. The asset gathers strength to decisively break above the 200-hour Exponential Moving Average (EMA), which trades around 1.3700.
The 14-period Relative Strength Index (RSI) retreats inside the 40.00-60.00 range, suggesting a consolidation ahead.
Fresh buying opportunity would emerge if the asset breaks above June 11 high near 1.3800. This would drive the asset towards April 17 high at 1.3838, followed by 1 November 2023 high at 1.3900.
In an alternate scenario, a breakdown below June 7 low at 1.3663 will expose the asset to May 3 low around 1.3600 and April 9 low around 1.3547.
USD/CAD hourly chart
Economic Indicator
Gross Domestic Product (MoM)
The Gross Domestic Product (GDP), released by Statistics Canada on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in Canada during a given period. The GDP is considered as the main measure of Canadian economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.
XAU/USD longs may shrink on weak PCE data – TDS
398743 June 27, 2024 22:06 FXStreet Market News
Precious metals are on the front foot despite the mixed bag of economic data this morning, commodity analysts at TD Securities note.
Hot PCE data to push Gold higher
“Traders will continue to watch the data like hawks, particularly as it represents a key catalyst for the macro traders who have thus far been happy to remain underpositioned in Gold (XAU/USD) for the coming Fed cutting cycle.”
“In this sense, the PCE data will be top of mind after the below consensus CPI and PPI data, and we look for the core segment to advance at its softest monthly pace of the year at 0.13%. Further signs that inflation is easing could start to generate more certainty around the Fed’s cutting path and finally get the macro community comfortable getting back into the market.”
“On the flip side however, we see only limited scope for downside should data come in hot. Indeed, Commodity Trading Advisors (CTAs) hold a margin of safety above $2,208/oz before any material selling, while physical demand from central banks and Asian precious metals appetite continues to support the market.”
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AUD/USD Price Analysis: Trading in a mini range within a range
398741 June 27, 2024 22:05 FXStreet Market News
- AUD/USD is contracting within a very tight range, itself within a range.Â
- The pair is likely to break out of both ranges eventually in an explosive move.Â
- An upside breakout is marginally more likely given the trend prior to the formation of the range was bullish.Â
AUD/USD is trading in a mini range within a range, visible on the 4-hour price chart. The pair has been going sideways since the middle of May but since June 19 the waves of buying and selling have further narrowed creating a “range-within-a-range”.Â
AUD/USD 4-hour Chart
A break above the mini-range high at 0.6679 would probably indicate a continuation up to the enveloping-range ceiling at 0.6709. Likewise a break below the mini-range low at 0.6625 would probably lead to a move down to the larger-range floor at 0.6590.Â
The short-term trend is sideways and as long as price remains within the bounds of the larger range it will likely keep extending within the range, since “the trend is your friend” as the saying goes.Â
Eventually the pair will break out of its range and the move is likely to be very strong since it is a general rule of markets that periods of low volatility like now are followed by sudden bursts of high volatility.Â
An upside breakout is marginally more likely to happen because the trend prior to the formation of the range was bullish.Â
A decisive break above the ceiling of the range would see a follow-through to a conservative target at 0.6770. A decisive break below the range floor would indicate a follow-through to an initial target at 0.6521.Â
A decisive break would be one in which a longer-than-average candle broke out of the range and closed near its high or low, or three successive candles of the same color broke cleanly through the range top or bottom.Â
The targets are generated using the technical-analysis method of extrapolating the height of the range by a Fibonacci 0.618 ratio higher (in the case of an upside break) or lower (in the case of a downside break). A more generous target would come from extrapolating the full height of the range.Â
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United States Pending Home Sales (YoY) came in at -6.6% below forecasts (2.5%) in May
398739 June 27, 2024 22:02 FXStreet Market News
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United States Pending Home Sales (MoM) below forecasts (2.5%) in May: Actual (-2.1%)
398738 June 27, 2024 22:02 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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