Silver price steady ahead of inaugural Yellen–chaired FOMC meeting wrap

Commerzbank expecting silver to bounce off critical support zone

Silver price steady ahead of inaugural Yellen–chaired FOMC meeting wrap, Wednesday 19 March:

Silver yesterday dropped to a one-week low at $20.611, marginally above last Monday’s five-week low of $20.59. The price fall happened as Russian president Vladimir Putin signed a treaty for the Russian Federation to annex the breakaway Ukrainian region of Crimea. Putin emphasized that Moscow has no intention of seizing more territory in eastern Ukraine.

After the fall, silver found support at its previous range top, which had provided resistance until February’s breakout (see chart below). The precious metal vacillated around $20.85 through today’s Asian session and then, minutes before the London open, a trivial sell-off sent the price to an intraday low of $20.705., Since then though, buyers of last resort have reversed the dip and right now silver is trading at around $20.879, down just 0.02 percent intraday.

Today the focus of the markets is likely to shift from Eastern Europe to the US, where the Federal Open Market Committee will announce its latest monetary policy decision in a statement due out at 18:00 UTC. The current meeting is the first under the leadership of new Federal Reserve chair Janet Yellen and she is scheduled to front a press conference at 18:30 UTC.

The US central bank is widely expected to announce a further $10 billion reduction in the monthly pace of its bond-buying programme, reducing it to $55 billion. The two prior tapers resulted in sharp but short-lived drops in the price of silver (see chart below).

The FOMC is expected to also release updated economic projections and markets will be paying close attention to the forecasts.

As RBS chief economist Michelle Gerard puts it: “The shift to qualitative guidance will put more focus on the Fed’s Summary of Economic Projections (SEP), particularly the 'dots' that reflect participants expectations for the funds rate at the end of 2015, 2016 and over the longer term.”

Commerzbank senior technical analyst Axel Rudolph expects silver in the coming month to bounce off the 20.65/49 major support zone (October lows and December/January highs) and target the 22.73/23.12 region.

“Currently unexpected failure at 20.65/49 would push the psychological 20.00 mark back to the fore”, counsels the Commerzbank chartist. “Only an unexpected daily close below the 19.57 November low would force us to neutralise our medium term outlook.”

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