By IFCMarkets

Silver and other precious metals are retreating in the wake of Fed comment on Tuesday. The President of Dallas Fed Robert Kaplan is expecting the rate hikes in both June and July. Two other Fed Presidents said the rate may be hiked not only two but even three times this year. Such comments pushed the US dollar up and prices for precious metals lower as they are negatively correlated. Will the silver continue posting losses?

The Fed Presidents gave positive comments after the release of strong economic data. Inflation for April reached its 3-year high of 1.1% year on year. Core inflation (ex. Food and energy) was 2.1% which is consistently above the Fed target level of 2% while in March core inflation was 2.2%. The Fed believes such a dynamics highlights better private demand. In the meantime, housing starts and industrial production rose in April. Now investors expect the pace of US economic growth to accelerate which will enable rate hike. As to silver, it gained almost 30% since the start of the year while gold rose only 20%. The price correction is probable in case the US dollar continues strengthening. The crucial US GDP for Q1 2016 will be released on May 27.

On the daily chart XAGUSD: D1 has hit a fresh 17-month high and is correcting down within the persisting rising trend. The MACD and Parabolic indicators give signals to sell. The RSI has fallen to the level of 50, no divergence. The Bollinger bands remain widened which means higher volatility. The bearish momentum may develop in case the silver prices dip below the last fractal low and the first Fibonacci retracement at 16.7. This level may serve the point of entry. The initial stop-loss may be placed above the Parabolic signal and the last fractal high at 17.6. Having opened the pending order we shall move the stop to the next fractal high following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 16.7 without reaching the order at 17.6, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Market Analysis provided by IFCMarkets