Silver prices fell more than 3.5% on Friday, after strong Non-Farm Payrolls data put the non-yielding white metal on the defensive.
Comments from Vice-Chair Clarida and Fed Reserve Board Member Christopher Waller indicated the Fed might start tapering from late 2021. The Fed has always maintained that inflation and employment needed to improve dramatically to make this happen. While inflation data had started trending in this direction in June, employment data had lagged behind.
But with jobless claims data now nearing pre-pandemic levels and today’s Non-Farm Payrolls data showing the addition of slightly less than a million jobs, bets are now up that the Fed now has what it needs to start tapering.
Tapering and a potential early increase in interest rates raise the returns on USD-denominated assets, drawing investment capital away from non-yielding metals like gold and silver towards these USD-based assets such as bonds.
The evolving falling wedge is now seeing a significant challenge on its lower border. A breakdown of this border also jeopardizes the demand zone, bringing 23.164 into the picture as the next downside target. Below this level, 23.00 and 22.602 constitute additional targets. This move also invalidates the wedge pattern.
On the other hand, a bounce from the wedge’s lower border keeps the pattern alive. The pattern’s evolution into a bullish breakout requires the bulls to push silver prices above 24.569 and 25.386. The measured move from a wedge break is expected to peak at 27.502, which lines up 25.724, 26.325 and 26.868 as potential upside targets along the way.
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