• Silver rall¡ies further on US Dollar weakness and hits fresh long-term highs at $42.45.
• Weak US employment data and moderate inflation pave the path for a Fed cut next week.
• XAG/USD might have reached the target of the bullish cycle from mid-August, at $42.45.

Silver’s (XAG/USD) broke higher on Thursday and has reached a fresh 14-year high at $42.45, favoured by US Dollar weakness after US Jobless Claims and CPI data paved the path for a Fed rate cut next week.

US Initial Jobless Claims rose at their fastest pace in the last four years last week, which, together with the downward revision of the Nonfarm Payrolls data reported earlier this week, highlights the deterioration of the US labour market.

At the same time, August Consumer Prices index broadly met market expectations, with a 2.9% year-on-year reading from the 2.7% increase seen in July, while core inflation remained steady, at a 3.1% yearly pace. These figures have curbed hopes of a 50 bps rate cut but keep expectations of a quarter-point easing move alive.

Technical Analysis: Bulls might struggle to extend gains beyond $42.50

Looking from an Elliott Wave perspective, the pair might have reached the target of a 5-wave bullish cycle at the $42.50 area. This level is the 261.8% Fibonacci extension of wave 1 (August 20-25 rally).

Beyond that, the 4-hour RSI shows a bearish divergence, suggesting that bulls are losing steam after having rallied beyond 14% since mid–August. Beyond here, the next target would be the $43.00 level.

To the downside, immediate support is the $41.50 previous resistance area. Further down, the area between September 2 and 4 lows at 40.40 and 40.15 is likely to be the next bearish target.