Silver ahead extreme macro data week – where is it headed?

Brutal macro week ahead

This week is very generous in terms of macro data. Especially from the US, where inflation data and Fed rate decisions are awaited. These data are extremely connected because inflation is one of the main indicators for further monetary policy. Rising inflation needs to be cooled down by rising interest rates. On the other hand, if inflation decreases from its highs, it is a sign that monetary policy does not have to be hawkish.

Read more: S&P 500 defends short-term support

Consumer price index data are going to be released on Tuesday at 14:30 CET. The consensus for CPI YoY is 7.3% from the previous 7.7% and core CPI is awaited at 6.1% from the previous 6.3%. Generally, predictions show decreasing inflation. Question is, what results we will see tomorrow? And what the Fed is going to do on Wednesday?

Silver before data

Silver keeps its uptrend for quite a time. Despite the volatility in the precious metal, it has been appreciating since September. In the short-term view, silver gained 7.71% in last 5 days with the top at $23.900. It seems, that the current situation in markets is favorable to silver, but CPI and Fed could change this course.

Futures volume shows defending support

The chart below shows that silver currently tested POC (Yellow dotted line – Point of control) from Friday. This support is at the level of $24.000. Moreover, the monthly volume shows that another support is at $23.250 and $22.875.

We also analyzed: US bond yields remain pressured

The last mentioned level is the highest traded volume of the current month. Which could work as a magnet for fulfilling limited orders. Especially in the case, that macro data will push the price down.

30 minutes chart of SI (Silver Futures), source:  tradingview.com, author’s analysis

Monthly VWAP points out that the developing POC of the month, which is calculated as the developing average, is currently at $22.945. This is quite close to the support level of $22.875 determined by the monthly volume profile.

30 minutes chart of SI, Monthly VWAP, source: tradingview.com, author’s analysis

All eyes on Fed

A day after highly anticipated CPI data, a more important fundament will come. Fed rates decision is very important data for the next course of markets. The consensus of interest rates is 4.5% which is a rate hike of 50 bps from the previous 4%.

This scenario could help the markets and hold risk-on mode. But a 75 bps rate hike is still in the play. This scenario is probable in the case where CPI will be higher than predictions.

Currently, the Moodix market sentiment indicator shows -0.34 points, which indicates the risk-off mode. Mode where money tends to flow to less-risky assets.