Silver prices have dropped for three straight days, trading near $41.30 during the Asian session on Thursday. The decline comes as a strong inflation outlook has curbed expectations for additional rate cuts by the Federal Reserve, negatively impacting the price of silver, which is not directly driven by interest rate policies. Projections from the FOMC show that policymakers expect median inflation to reach 3% this year, significantly above the central bank's 2% target. The Fed announced a 25-basis-point rate cut on Wednesday and hinted at a further 50-basis-point reduction by the end of the year, slightly higher than its June projections. Meanwhile, the Bank of Canada also lowered its policy rate by 25 basis points, while the Bank of England and the Bank of Japan are expected to keep their policies unchanged this week. Federal Reserve Chair Jerome Powell pointed to growing signs of labor market weakness to explain why officials decided it was time to cut rates now, especially after concerns over tariff-driven inflation led them to hold rates steady last December. However, strong industrial demand from sectors such as solar energy, electric vehicles, and electronics — along with ongoing supply constraints — may limit the downside for silver. According to Reuters, citing industry sources, India's silver imports are also expected to strengthen in the coming months, supported by solid investment and industrial demand that has absorbed the excess supply brought about by increased exports last year. 

Amid ongoing inflation concerns, central banks remain cautious. The Fed's cautious stance has strengthened the U.S. dollar and put pressure on commodities. While U.S. employment data shows a softening labor market, inflation remains the primary concern for global policymakers. The performance of the U.S. dollar on Thursday reflects the market's ongoing adjustment to the Fed's dovish stance. Despite potential concerns over a deteriorating labor market, the U.S. dollar has shown mild strength. After rebounding from Wednesday's lows, the market holds a more balanced view on the Fed's cautious approach to further easing, although significant uncertainty remains regarding the pace of future rate cuts. 

Based on the daily chart, silver's Bollinger Bands are expanding upward, with moving averages trending higher. The price is moving strongly upward along the EMA12 and has not effectively broken below the uptrend line. Although the MACD shows a potential death cross, the momentum histogram has not yet weakened. The RSI stands at 63, indicating that bullish sentiment in the market remains strong. The next key resistance levels are near the previous high and the psychological integer level at $43.3 and $50. It is important to note that the price should not effectively break below the EMA50 support level at $39.2, which serves as a key dividing line between bullish and bearish momentum. A breakdown of this level would make it difficult for the price to return to an uptrend in the short term. In the 4H chart, the price is oscillating between the Bollinger Middle Band and Lower Band, signaling relative weakness. If the price can reclaim the Bollinger Middle band or the EMA50, it is likely to push upward again toward $43, or even $50. Failure to hold these levels could lead to a decline toward previous lows and the EMA200, around $40.4 and $39.9, respectively. Therefore, buying at lows is recommended.

Trading direction: Buy

Entry price: 40.8

Target price: 45

Stop loss: 38.7

Support: 40.5/40/38.7

Resistance: 41.5/45/50