FUNDAMENTAL OVERVIEW
Silver broke down last week as continued escalations in the Strait of Hormuz and hawkish Fed expectations after the strong NFP raised real yields and tightened financial conditions. Everything changed on Thursday when Trump cancelled his planned attacks on Iran and announced a deal with confirming reports from the Iranian side. This surprising breakthrough triggered a strong reversal on expectations of lower oil prices, easing inflation concerns and lower risks of rate hikes.
In the short-term, the focus continues to be on the positive drivers from the reopening of the Strait of Hormuz, so we can expect the bullish bias to hold (all else being equal) but the FOMC decision today remains a risk.
The Fed is widely expected to keep interest rates unchanged and remove the easing bias from the statement. At this meeting, we will also get the Summary of Economic Projections (SEP) where inflation is expected to be revised higher while the unemployment rate could see a slight downtick in the short-term. The focus will be mostly on the dot plot which is expected to show no cuts this year and the next. All of this is expected and already priced in.
- You can find a comprehensive Fed preview here
The main hawkish surprises include a rate hike in the 2026 dot or more than one in 2027. In this scenario, we will likely see a selloff in silver with the price falling back to pre-deal levels. On the other hand, the dovish surprises include a rate cut in the 2026 dot or in the 2027 dot as that would implicitly signal an easing bias. In such a scenario, we can expect silver to rally into new highs and start targeting the 90.00 handle.
Fed Chair Warsh’s first press conference will also be in focus, although I would argue that the Board is going to be more important than the Fed Chair at least until the markets get to know him better and he proves to be independent. Trump just gave Warsh a big assist by ending the war, so he can say the Fed can look through the short-term increase in inflation.
Looking ahead, the risk is that the negative supply shock caused by the US-Iran war turns into a positive demand shock as the conflict ends that boosts economic activity further requiring rate hikes anyway. That’s likely to be the next tail risk for precious metals.
SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that silver broke below the major trendline last week and extended the losses targeting the next major trendline until the surprising US-Iran deal reversed the momentum. The price has almost pulled all the way back to the broken trendline where we have now a strong resistance around the 71.00-73-00 price area.
This is where we can expect the sellers to step in with a defined risk above the broken trendline to keep pushing into the next major trendline around the 55.00 handle. The buyers, on the other hand, will want to see the price breaking higher to open the door for a rally back into the 90.00 handle.
SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see the market opened the week with a positive gap and consolidated. It wouldn’t be surprising to see a spike lower to close the gap before another rally into new highs, but that will likely need to be supported by the FOMC decision today.
SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see more clearly the recent rangebound price action as traders await the Fed’s decision. We can expect the buyers to step in around the 68.00-69.00 price area to position for a rally into the 90.00 handle on a neutral to dovish Fed decision. Conversely, a more hawkish than expected one should result in a selloff back towards the pre-deal levels. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the FOMC rate decision. Tomorrow, we get the latest US Jobless Claims figures. On Friday, the US-Iran “peace deal” is expected to be signed in Switzerland.
