Silver is on the verge of a significant break below daily support

• Precious metals are under pressure as the US dollar remains firm ahead of the Fed.
• Silver is testing critical daily support ahead of the main event on Wednesday, 

Silver prices are lower on Tuesday as the markets await the Federal Reserve's interest rate decision. This will be accompanied by a statement followed by the Fed's Chair, Jerome Powell.

Powell will be addressing the press with commentary surrounding the central bank's outlook for the economy and inflation risks. 

Meanwhile, the dollar edged higher to a one-month high against a basket of currencies, aided by data showing inflation picking up.

Traders may speculate that continued inflationary pressures will have to be accounted for by the Fed in their plans to start tapering its bond purchases.

Data on Tuesday showed US Retail Sales dropped more than expected last month as the covid vaccinations enable the US population to spend their way out of the COVID-19 restrictions.

However, robust demand is outpacing supply, stoking inflation, with the producer price index for final demand increased 0.8% last month after rising 0.6% in April.

Nevertheless, the markets are pricing for a dovish Fed for longer considering the communication to date by Fed officials that have insisted that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time.

However, recent economic data has raised concerns that price pressure could force an earlier stimulus withdrawal which has been supportive of the greenback over recent times. 

Meanwhile, Wall Street took a step back from record highs which are also playing into the hands of the dollar bulls and weighing on precious metals as investors consider the implications of a Fed that is on the verge of tapering monetary stimulus.

The Dow Jones Industrial Average was down 86 points, or 0.25% in afternoon trading, while the S&P 500 SPX lost 7 points, or 0.16%, and the Nasdaq Composite IXIC dropped 101 points, or 0.72%.

Silver price analysis

The daily chart is compelling with the price attempting to close below the support and the 21-EMA.

In doing so, the outlook will be significant bearish leading into the Fed.