Following the decisions of the US fed to cut forecast of GDP growth and leave the March forecast of the increase of interest rate unchanged, the prices of the precious metals went up. Experts believe that at the end of this year interest rate in the USA can reach 0.625%, at the end of 2016 it will be at the level of 1.625%, and at the end of 2017 – 2.875%. However, the market expected more optimistic forecast. Authorities of the Bank said that a lot would depend on the state of the labor market. Currently, unemployment rate in the USA amounts to 5.5%. According to projections by the US Fed by the end of this year this level will fall to 5.2% -5.3% and by the end of 2016 unemployment rate will reach 5.1%-4.9%. In view of the low interest rates, investor’s interest in the precious metals is increasing.
Attention today shall be paid to the US data on consumer price index for May, business activity index in the manufacturing sector for June from the Federal Reserve Bank of Philadelphia. It is expected that the indices will be positive for the American currency. Therefore, the USD can undergo correction and then, win back some of the losses related with the decisions of the US Fed. The quotes of XAG/USD can go down.
Support and resistance
The pair XAG/USD has been rising and since the opening of the Asian session it has grown by 180 points. The price has pushed off from the lows of May at the level of 15.83 and from the bottom line of the ascending corrective channel. From the top the rise in the pair XAG/USD is limited by the resistance level of 16.75 (Fibonacci 23.6%), which coincides with ЕМА144 and 17.10 (ЕМА200 on the daily chart).
On the daily and four-hour charts the indicators OsMA and Stochastic и Стохастик give buy signals.
However, on the four-hour chart the price is under pressure from resistance levels of 16.40 (ЕМА200) and 16.35 (ЕМА144).If the price breaks down these levels, next resistance will be at the level of 16.75 (Fibonacci 23.6%). The situation is uncertain, as the market is affected by yesterday’s news from the US Fed. The market needs to calm down and determine movement direction for the medium-term
Support levels: 15.30 and 15.83.
Resistance levels: 16.40 and 16.75.
Short positions are still advisable, although they can be opened after clear signals of the indicators. Long positions from the level of 16.40 with the targets of 16.75 and 17.10 can be opened after the confirmation of the new short-term uptrend (the third column of OsMA histogram shall be above the zero line on the daily chart).