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Silver (XAG) Daily Forecast: Downward Channel to Drive Sell Under $31
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Key Points:
- Silver prices (XAG/USD) remain under pressure, hovering around $30.62 and hitting an intra-day low of $30.51.
- Silver's declines may be limited as expectations grow for a Federal Reserve rate cut in 2024, potentially weakening the US dollar.
- Traders await important US macro releases, particularly the Nonfarm Payrolls (NFP) report on Friday.
Market Overview
Despite favorable factors, silver prices (XAG/USD) remain under pressure, hovering around $30.62 and hitting an intra-day low of $30.51. This downward trend is attributed to risk-on market sentiment driven by easing tensions in the Middle East, reducing the safe-haven demand for silver.
However, the declines in silver prices may be limited as expectations grow for the Federal Reserve to cut interest rates in 2024, potentially weakening the US dollar and supporting silver. This sentiment is bolstered by the unexpected drop in the ISM Manufacturing PMI to 48.7 in May, down from 49.2 in April.
Looking ahead, traders await important US macro releases, particularly the Nonfarm Payrolls (NFP) report on Friday, and central bank events, including the Bank of Canada’s decision on Wednesday and the European Central Bank’s meeting on Thursday, which could impact silver prices.
Easing Inflation and Rate Cut Expectations Boost Silver Prices, Weaken USD
Signs of easing inflation and slowing economic growth have heightened expectations for a Federal Reserve rate cut this year. The ISM Manufacturing PMI fell to 48.7 in May, indicating the second consecutive month of contraction in the US manufacturing sector.
This has led traders to anticipate rate cuts, with a nearly 60% probability of a 25 basis point cut in September, according to the CME FedWatch Tool.
Consequently, the US Dollar has slid to its lowest level since April 10. The Personal Consumption Expenditures (PCE) Price Index remained steady at 2.7%, with the core gauge rising to 2.8%. These factors may limit losses in silver prices by supporting its value.
Silver’s Safe-Haven Appeal Declines Amid Eased Israel-Hamas Tensions
Silver’s appeal as a safe haven has declined due to easing tensions in the Israel-Hamas conflict. A Reuters report indicates that the US is seeking UN Security Council support for President Biden’s ceasefire proposal to halt fighting between Israel and Hamas.
On Sunday, Israeli Prime Minister Netanyahu’s administration reluctantly agreed to the ceasefire plan, suggesting potential de-escalation in the region. This development has impacted silver’s traditional safe-haven status in financial markets.
Short-Term Forecast
Silver (XAG/USD) is likely to remain under pressure below $31, with risk-on sentiment and easing geopolitical tensions reducing its safe-haven appeal. Expect potential support from anticipated Federal Reserve rate cuts.
Silver (XAG/USD) is trading at $30.62, down 0.32%. The pivot point is at $30.91, with immediate resistance levels at $31.57, $32.27, and $33.03. Immediate support levels are identified at $30.04, $29.35, and $28.70. The 50-day Exponential Moving Average (EMA) is positioned at $30.94, and the 200-day EMA stands at $29.30.
The downward channel is extending resistance near the $30.90 level. If candles close below this level, it is likely to drive a selling trend. The 50 EMA reinforces a bearish outlook if silver holds below the $30.90 mark. Overall, the outlook remains bearish below $30.90, but a break above this level could boost a bullish bias.
About the Author
Arslan Aliauthor
Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.
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