Silver bulls target a 50% mean reversion

• Silver is correcting looking for a test of the Fibonacci retracement levels. 
• The US dollar is sulking in the face of lower expectations of a near term taper announcement. 

The price of silver was higher on Wednesday as the US dollar fell on the back of the market's profit-taking following the softer than expected inflation data. XAG/USD rallied from a low near $23.21 to a high near $23.59.

The consumer price index increased 0.5% last month after climbing 0.9% in June, the Labor Department said.

In the 12 months through July, the CPI advanced 5.4%. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.

Economists polled by Reuters had forecast overall CPI would rise 0.5% and core CPI 0.4%.

The yield on the US 10-year yield Treasury note eased 2bps to 1.33%.

The dollar index DXY, which measures the greenback against a basket of other major currencies, was down 0.17% by the close of play on Wall Street at 92.910 and near to the lows of 92.801 in mid-day trade. 

Earlier, it hit 93.195, the highest since April 1, and not far off of its 2021 high of 93.439.

However, Fed members continue to sound the alarm with respect to timings of tapering. 

Comments from Fed Reserve Bank of Kansas City President Esther George supports the view that the time to taper is near.

“Today’s tight economy … does not call for a tight monetary policy, but it does signal that the time has come to dial back the settings,” the Fed official said. 

Silver technical analysis

The bulls are on the path for a test of the 38.2% Fibonacci retracement level ahead of the 50% mean reversion level near 24.05.

A break thereof will put prospects of a deeper correction to the fore where the 27 July lows and the confluence with the 61.8% Fibonacci Retracement level will be eyed near 24.50.