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Silver fell more than 3.5% on Friday after strong non-farm payroll data put the non-profitable white metal on the defensive.
Comments from Vice-Chair Clarida and Fed board member Christopher Waller suggested that the Fed could begin throttling in late 2021. The Fed has always maintained that inflation and employment would have to improve dramatically to achieve this. While inflation data trended in this direction in June, employment data lagged.
But with jobless claims data now approaching pre-pandemic levels and today’s non-farm payroll data showing the increase of just under a million jobs, bets are now high that the The Fed now has everything it needs to start reducing.
Tapering and a possible early interest rate hike increase the returns on USD-denominated assets and draw investment capital from unprofitable metals like gold and silver towards those USD-based assets like bonds.
Silver price outlook
The developing falling wedge now sees significant challenge at its lower limit. Breaking this limit also jeopardizes the demand zone and brings 23.164 into the picture as the next downside target. Below this level, 23.00 and 22.602 represent additional targets. This move also invalidates the wedge pattern.
On the other hand, a crack from the bottom of the wedge keeps the pattern alive. Developing the pattern into a bullish breakout requires the bulls to push silver prices above 24.569 and 25.386. The measured movement is expected to peak from a wedge break at 27.502 which represents 25.724, 26.325 and 26.868 as potential upside targets along the way.
Silver price (XAG / USD): daily chart
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