On Wednesday, July 31st, due to dovish comments from US Federal Reserve Chairman Powell that weighed on the US dollar, as well as the escalating tensions in the Middle East, spot silver rose more than 2%. FXStreet analyst Christian Borjon Valencia recently wrote an analysis of the technical trend of silver prices.
Valencia wrote that silver prices resumed their upward trend on Wednesday, soaring over 2% and breaking through the key resistance level of the 100-day moving average (DMA) at $28.58 per ounce.
Physical silver soared 2.15% to close at $28.98 per ounce on Wednesday.
The Federal Reserve ended its two-day monetary policy meeting on Wednesday. The Federal Open Market Committee (FOMC) voted unanimously to keep the benchmark federal funds rate unchanged in the range of 5.25% to 5.5%, and reiterated its intention to lower interest rates after gaining confidence in cooling inflation.
Fed Chair Powell said at a news conference that second-quarter inflation data increased the Fed's confidence and made "further progress" toward achieving its 2% inflation target. If inflation tests are met, the Fed could cut rates as early as September.
The ICE US Dollar Index fell 0.4% to close at 104.06 on Wednesday.
Regarding the Middle East situation, the latest report from the New York Times on Wednesday stated that three Iranian officials said that Iran's Supreme Leader, Ayatollah Ali Khamenei, had ordered direct strikes on Israel in retaliation for the killing of Hamas leader Haniyeh in Tehran. Iran and Hamas accused Israel of carrying out the assassination.
The report stated that three Iranian officials, including two members of the Revolutionary Guard, said that Khamenei issued the order at an emergency meeting of Iran's Supreme National Security Council on Wednesday morning. Shortly before that, Iran announced that Haniyeh had been killed.
What’s next for silver prices?
Valencia wrote that the bullish trend of silver is still playing out, and the relative strength index (RSI) shows an increase in bullish momentum, with the next targets including $29.44 and $30.00 per ounce.
As the RSI showed, buyers gathered some momentum. Although the index is still below the neutral line, the sharp increase suggests that it will turn bullish and confirm the price trend.
Valencia said that if silver prices hold above $29.00 per ounce, the next target will be the July 24 high of $29.44 per ounce, followed by the 50-day moving average (DMA) at $29.89 per ounce. Once silver prices break through $30.00 per ounce, further increases are expected.
(Daily chart of spot silver, source: FXStreet)
Valencia added that on the other hand, if silver prices fall below the 100-day moving average of $28.58 per ounce, the next support level will be the July 29 low of $27.31 per ounce, followed by $27.00 per ounce.
At 08:21 Beijing time, physical silver reported at $29.04 per ounce.