Silver Prices Surge Over 2% Following Weak U.S. CPI Data

Spot silver prices jumped by more than 2% due to weak U.S. Consumer Price Index (CPI) data, triggering a sell-off of the U.S. dollar. FXStreet analyst Christian Borjon Valencia has analyzed the technical trends of silver prices in a new article released on Friday.

Valencia noted that silver prices exhibited a 'double-bottom' pattern. The weaker-than-expected inflation data from the U.S. has led to renewed discussions on when the Federal Reserve might start loosening monetary policy. As a result, silver prices surged by more than 2% on Thursday.

Spot silver closed at $31.44 per ounce, a 2.04% increase, with the highest price reaching $31.75 per ounce.The U.S. Department of Labor reported on Thursday that the U.S. CPI for June fell by 0.1% from a year earlier, marking the first decline since May 2020. The market had expected a 0.1% increase. The year-on-year CPI rose by 3.0% in June, missing market expectations of a 3.1% increase and hitting its lowest level since June of last year.

Additionally, the June core CPI rose by 0.1% month-over-month, below the market expectation of a 0.2% increase, and was the lowest level since August 2021. The year-on-year core CPI for June rose by 3.3%, below market expectations of a 3.4% increase, and marked the lowest level since April 2021.

Following the release of the U.S. CPI data, the odds of the Federal Reserve cutting rates by 25 basis points in September surged to 85%, up from Wednesday's 70%, according to the Chase & Co (CME) Fed Rate Watch tool. The U.S. dollar index ended Thursday's session 0.51% lower at 104.48, with a session low of 104.08.

Trading Silver: Next Steps

Valencia pointed out that silver prices broke above the "double bottom" neckline at $30.73 per ounce, paving the way for a rebound above $31.00 per ounce on Thursday. Silver prices reached a six-week high of $31.75 per ounce.

The Relative Strength Index (RSI) suggests that buyers are regaining control, indicating further potential gains for silver. Valencia highlighted that the next resistance levels for silver are $31.75 per ounce, followed by the psychological level of $32.00 per ounce. Breaking these levels could push silver to the May 29 high of $32.15 per ounce and the year-to-date high of $32.51 per ounce.

Conversely, if silver prices fall below $31.00 per ounce, it could intensify the pullback. The next support areas would be the June 21 high of $30.73 per ounce, followed by the $30.00 per ounce mark. Further declines could see silver sellers testing the convergence of the April 12 high and the 50-day moving average at $29.82/79 per ounce.