Silver (XAG) Forecast: Bulls Target 50-Day MA Breakout After Dollar Breakdown

Dollar Breakdown and Oil Selloff Light a Fire Under Silver

Spot Silver (XAGUSD) had a strong session Wednesday and I knew where it was coming from before the first hour closed. The U.S. Dollar Index was breaking down, Treasury yields were pulling back, and crude oil was getting hit hard on Iran peace headlines. Three drivers moving in the same direction at the same time. Silver doesn’t need more than that.

Technical Analysis

The main trend is down according to the daily swing chart, however, the secondary higher bottom at $70.86 suggests the trend may be getting ready to turn higher. The short-term range is $61.00 to $83.06, its retracement zone at $72.03 to $69.43 stopped the selling.

The aforementioned minor support zone is the last support before the 200-day moving average at $63.28, which controls the long-term trend. Additional long-term support is the $61.00 main bottom from March 23 and 50% of the all-time high at $60.83.

The market received a boost on Wednesday when buyers overcame the long-term 61.8% level at $74.63. This move created the upside momentum needed to challenge the 50-day moving average at $77.57. This is the major barrier that has to be recovered in order to accelerate the rally.

From April 14 to April 21, buyers toyed with the idea of an upside breakout, even reaching $83.06, while the indicator sat at $78.93. This $4.13 breakout wasn’t enough to sustain the rally and prices retreated. So when I say we’re going to need buyers to break out over the 50-day MA with conviction, in this case it appears it’ll have to be by more than $4.13 to attract enough strong buying to extend the move.

The next major move in Spot Silver (XAGUSD) will be determined by trader reaction to the 50-day MA. The buying has to be strong enough to encourage speculators to buy strength and take out offers. If they’re not passionate enough to aggressively attack the offers then the rally will fail and traders will revert to buying dips again.

The Dollar Opened the Door

The U.S. Dollar Index broke lower Wednesday and silver walked right through. A softer dollar makes Spot Silver (XAGUSD) cheaper for every buyer outside the United States and that flow showed up immediately. The euro and British Pound gained. The Australian dollar was the strongest performer after the Reserve Bank of Australia delivered its third rate hike of the year and pushed the currency near a four-year high. Then the Japanese yen surged to its strongest level in more than two months. Speculation that Japanese authorities stepped back into currency markets knocked the dollar toward 155 yen. Tokyo warned against excessive currency moves and the market took it seriously. The dollar stayed under pressure for the rest of the session and silver held its gains.

What Oil Brought to the Trade

Spot Brent crude dropped more than 8% Wednesday after reports surfaced that U.S. and Iranian officials were working toward a framework to end the conflict. Lower oil does something specific for silver that it doesn’t always do for gold. It eases inflation pressure, which pulls rate cut expectations forward, which reduces the appeal of yield-paying assets relative to metals. I’ve watched this chain run before. Oil drops, inflation cools, the Fed gets room to move, and silver picks up bids from both the monetary side and the industrial side at the same time. Wednesday that chain ran clean.

Silver Has Two Jobs

Gold gets most of the safe-haven attention but silver carries an industrial demand story that gold doesn’t have. Solar panels, electronics, electric vehicles. When risk sentiment improves and growth expectations stabilize, silver tends to respond more aggressively than gold because buyers are coming from two directions at once. Wednesday the weaker dollar opened the door and improving sentiment added the fuel. Both showed up.

The Yield Problem Hasn’t Gone Away

I’m not calling Wednesday a trend reversal. The 10-Year U.S. Treasury yield sat near 4.42% and that number is still doing damage to the upside case for non-yielding metals. Investors can collect 4.42% sitting in Treasuries without touching silver. That competition is real and it doesn’t disappear because the dollar had a bad session. Wednesday’s rally was strong. The yield ceiling is still there.

What I’m Watching

The 50-day moving average at $77.57 is the only level that matters right now. The buyers overcame the 61.8% level at $74.63 Wednesday and that created enough momentum to put the 50-day in play. But I’ve already seen this market reach $83.06 with the 50-day sitting at $78.93 and still fail to hold the breakout. A $4.13 gap above the 50-day wasn’t enough last time. This time the buying needs to be stronger and it needs to come from active traders taking out offers, not passive buyers looking for value on dips. Those are two completely different animals.

Friday’s U.S. non-farm payrolls report is the next trade. A soft print and Treasury yields come down, rate cut expectations move forward, and the buyers who showed up Wednesday have a reason to come back harder. That is the scenario that puts the 50-day moving average at $77.57 under real pressure. A strong print does the opposite. The Fed stays patient, yields hold, and this rally runs out of fuel before it gets to the level that matters. I’ve seen both versions of this play out. Which one arrives Friday determines whether the 50-day gets tested with conviction or silver slips back into a dip-buying range. The 50-day is the line. Everything else is noise until the market tells me otherwise.

More Information in our Economic Calendar.