Technical signals suggest reversal in silver prices

Silver prices are trading below $28.00 on Monday after a sharp decline on Friday, driven by the release of US employment data. The report reduced the likelihood of a larger interest rate cut by the Federal Reserve (Fed) in September. This puts pressure on the white metal.

Lower interest rates usually make precious metals, which do not generate interest income, more attractive for investors. According to CME FedWatch, the probability of a 25-basis-point rate cut at the Fed's meeting on September 17–18 is estimated at 69% and a 50-basis-point cut at 31%.

Data released at the end of last week showed an increase in US employment in August and a decline in the jobless rate to 4.2%. This confirms the stabilization of the labor market and suggests no need for a half-point easing of monetary conditions.

The key events of the week will be the US Consumer Price Index (CPI) for August and Producer Price Index (PPI) released on Wednesday and Thursday respectively.

Meanwhile, China's economic struggles have reinforced the bearish sentiment. The manufacturing PMI fell to 49.1 in August, hitting a six-month low. This indicates a contraction in manufacturing activity. The weakness in this sector raises concerns about declining industrial demand for silver, which is widely used in electronics and renewable energy.

On the technical level, silver prices are in a wide downtrend on the H2 timeframe. In terms of wave analysis, the price is forming the fifth (final) downward wave. However, the divergence of the Relative Strength Index (RSI) (standard values) suggests a possible change of direction and a new upward cycle formation.

Signal:

The short-term outlook for silver suggests buying. 

The target is at the level of 29.50.

Part of the profit should be taken near the level of 28.800.

A Stop loss could be set at the level of 26.800.

The bullish trend is short-term, so the trading volume should not exceed 2% of your balance.