XAG/USD climbs steadily and tests the $22.00 mark

  • Silver (XAG/USD) gains modestly but faces strong resistance around $22.00; so far is up 1.25% in the week.
  • Risk aversion keeps precious metals strong as greenback and US Treasury yields fall.
  • Silver Price Forecast (XAG/USD): A daily close above $22.00 would open the door for further gains; otherwise, the downtrend would resume.

Silver (XAG/USD) is recording gains but appears to be stuck at the $22.00 mark as bulls XAG/USD failed to record a daily close above the 22.00 area $ for four consecutive days, although the mood of the market is gloomy. As of this writing, XAG/USD is trading at $22.05.

Precious metals climb on weaker US economic outlook

US equities continue to illustrate a lackluster market mood consistent with the Asian and European sessions. S&P’s global PMIs revealed that Europe and the United States were showing mixed results, raising investor concerns that Europe and the United States could suffer from a possible economic slowdown. Supply chain issues persist and rising commodity costs would keep inflationary pressures high.

Given the backdrop of the Federal Reserve tightening monetary conditions in the United States and set to hike 50 basis points in June and July meetings, concerns over the US central bank’s achievement of A soft or “soft” landing, as Fed Chairman Powell put it, is a long way to go. This is why market participants keep the downward pressure on the US stock market and the weakness of the US dollar.

The US dollar index, an indicator of the greenback’s value against a basket of its rivals, slipped 0.24% and was down at 101.850. Failure to reclaim the 102,000 mark would open the door for a retest of the April 21 low at 99,818. On the same note, the 10-year US Treasury yield is falling and losing almost ten basis points (bp), standing at 2.761%, a tailwind for silver prices.

Elsewhere, Atlanta Fed President Raphael Bostic crossed the wires, though he sounded less “hawkish” than usual. Bostic said rate hikes won’t cause a recession and the central bank can raise rates to deal with too high inflation without sending the US economy into recession. He said the US central bank may suspend rate hikes in September to review the performance of the economy.

On the macro side, the US record featured the US S&P Global PMI for May, which showed mixed results, with the services and composite indexes missing expectations while the manufacturing PMI was unchanged. Additionally, the Richmond Fed’s manufacturing index dipped to -14 from the expected 15, adding to regional Fed manufacturing reports showing deceleration or contraction.

Silver Price Prediction (XAG/USD): Technical Outlook

XAG/USD is still biased lower, despite posting gains for the third day out of the last four. However, it is important for XAG/USD traders to be aware that silver struggled at the $22.00 mark. A failure at the previously mentioned level would restart the downtrend and open the door to further losses.

If this scenario plays out, the first support for XAG/USD would be the May 19th pivot low at $21.28. A break below would expose the daily low from May 16 at $20.84, followed by the year-to-date low at $20.45. However, if the XAG/USD bulls make a daily close above the $22.00 mark, it could allow for further gains. The first resistance XAG/USD would be the psychological bar of $23.00. Once cleared, the next areas of supply would be the May 5 high at $23.28, followed by a test of the 200-DMA at $23.57.

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