- Silver moved back into the $22.00 zone after an earlier failed test of the 21DMA at $22.20.
- XAG/USD is still up more than 1% on the day and more than 7.5% from recent lows mid-$20.00.
- Dollar weakness is driving the ongoing rebound, although there could be a rally this week amid more expected aggressiveness from the Fed.
Spot silver (XAG/USD) retreated from previous session highs in the $22.20 per troy ounce area after failing a test of the 21-day moving average, but continues to rally. trading with gains of around 1.2% on the day (more than 25 cents) amid the continued weakening of the US Dollar early in the week. For now, XAG/USD is holding at the $22.00 level and the ongoing bullish trend over the past ten days, which has seen the precious metal rebound over 7.5% from the lows. of several months in the middle of the $20.00, remains intact.
The main driver of this recent rally has been the sharp pullback in the US Dollar Index (DXY) from the multi-decade highs it posted above 105.00 earlier in the month. Since May 13, the DXY has fallen more than 2.5% from those highs to lows of 102.00, despite Fed policymakers appearing extremely hawkish last week in their intention to continue to do so. bring forward rate hikes to rein in runaway inflation, even in the face of a weaker economy/stock market.
Given the Fed’s role as a key driver of the dollar’s rise over the past several months, analysts are unsurprisingly wondering how long this dollar’s pullback will last. Dip shoppers will surely return at some point, they wonder. If there is a rally in the dollar this week, it would be bad for XAG/USD. Its inability to break above its 21DMA may prove crucial (failure of a major moving average is often seen by technicians as a bearish sign.
This week’s economic events undoubtedly present bilateral risks for XAG/USD. On the one hand, there will be a lot of speeches from the Fed as well as the release of the May meeting minutes and the tone should be more hawkish than ever. On the other hand, Tuesday’s U.S. (and global) flash PMIs and Thursday’s second estimate of U.S. first-quarter GDP growth could combine to trigger fresh concerns about U.S. (and global) growth, which could offer safe-haven support for silver, especially if it is seen as dampening the Fed’s long-term tightening outlook.