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Volatility Ahead of Fed Announcement


Waiting for a clear signal may be the best approach, given the volatility in this market.

  • The Silver price gapped higher to start the trading week on Monday, only to pull back almost immediately to fill the same gap.
  • The $23 level above could provide resistance, as silver tends to pay attention to large, round, psychologically significant figures.
  • Furthermore, it’s an area where we have seen noise in the past.

The 50-Day EMA is above the 200-Day EMA, which sits at the $21.85 level, and both moving averages could provide support. Technical traders pay attention to moving averages, and the area has been structurally significant in the past, even seeing a gap in December.

Silver is a volatile market, particularly sensitive to interest rates, risk appetite, and industrial demand. With the Federal Reserve announcement this week, expect even more wild swings, exacerbated by people trying to anticipate the Federal Reserve’s actions. At this point, there are a lot of concerns out there as to where the economy is going and of course inflation at the same time. This is going to cause chaos in the silver market, but eventually we should have an idea as to what the Federal Reserve is going to do.

If silver breaks below the moving averages, we could see a move toward the $21 level, which has been important multiple times in the past. To the upside, the $24 level has been a significant resistance point, and if we break above that, the $25 level looms large. Historically, the $25 level has been a major barrier, but once we break above there it’s not uncommon for silver to take off for another $20.

Going forward, the market will continue to experience volatility and choppiness. Investors should wait for an impulsive candlestick, preferably after the Wednesday session, to make trading decisions for the next swing. The next swing could be violent and impressive, so keep in mind that once we make our decision, we will more likely than not see a big move that you can take advantage of with a much bigger position, perhaps adding as you are proven correct.

At the end of the day, the silver market faces volatility as the Federal Reserve announcement approaches. The $23 level may offer resistance, and the 50-Day EMA and 200-Day EMA could provide support. With the market’s sensitivity to multiple factors, including interest rates, risk appetite, and industrial demand, expect significant swings. Waiting for a clear signal may be the best approach, given the volatility in this market.

XAG/USD chart

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