Silver (XAG) Forecast: Payrolls and Dollar Set Up Silver’s Next Move

Payrolls and Dollar Hold Silver’s Next Move

The metal rallied hard after the Fed held rates last week, then gave back most of the move when Treasury yields pushed to their highest level since 2007 and the dollar recovered.

The Fed cleared the July risk. It did not clear September. Payrolls Friday and the dollar’s response will decide whether the relief trade gets another leg or dies here.

Spot Silver (XAGUSD) is trading at $57.79, up $0.41 or +0.71%, at 07:06 GMT.

Weekly Spot Silver (XAGUSD) Technical Analysis

Spot silver (XAGUSD) is higher to start the week. It’s trading on the bullish side of a short-term retracement zone at $57.86 to $57.13. It’s also early support. Additional support is the swing bottom at $56.64. A trade through this level will reaffirm the downtrend and put the July 17 main bottom at $54.78 in play.

A sustained move over $57.86 will indicate the presence of buyers. If they can create enough upside momentum then $60.835 to $60.94 could be tested. Trader reaction to the main top at $60.94 could determine whether the rally extends into the 52-week moving average at $63.25. If sellers re-emerge, we could see another test of $57.86 to $57.13.

The weekly chart indicates that the key level to watch is the long-term 50% level at $60.835. A sustained move over this level could launch a rally into the 52-week moving average at $64.93.

Three Dissenters Made Sure This Was Not a Dovish Hold

The vote was 9-3 to hold at 3.50% to 3.75%. Beth Hammack, Lorie Logan and Neel Kashkari all wanted a quarter-point hike. Three hawks voting for action tells you how close this was. The market rallied anyway because traders had been positioned for the worst. When the hike didn’t come, the unwind was fast.

September hike odds dropped from above 80% before the meeting to about 65% by the end of the week. Silver moved up on that repricing because the dollar dropped.

Then Chair Kevin Warsh made the next step harder to read. He repeated the 2% inflation target but refused to signal September and gave no forecast for the rate path. The market got a hold, not a direction. That is a trader’s problem because you cannot position around a committee that will not tell you where it is going.

The hold was a pause, not a pivot.

Long-End Yields Took Back What the Dollar Gave

The 30-year Treasury yield moved above 5.20% last week, the highest print since 2007. The 10-year pushed higher alongside it. Silver caught a bid when the dollar fell after the Fed decision, but the bond market kept pressing yields higher and that brought sellers back before the week was over.

This is the ceiling right now. A falling dollar can move silver higher for a session. Rising long-end yields limit how far buyers can chase it. When both yields and the dollar are rising at the same time, there is no path up for the metal.

Bank of America sees the Treasury selloff as the market demanding the Fed restore its inflation credibility. Their read is that restoring credibility means a September hike unless labor weakens or inflation cools sharply. That keeps the pressure on silver even after a week where the Fed did not act.

Watch the Dollar, Not the Fed Speeches

The dollar reacts first when rate expectations shift. Silver follows. That is the order of operations this week.

The currency dropped after the Fed decision. Concerns about Japanese intervention added selling pressure and amplified the move lower. Silver ran on that unwind. Then U.S. yields recovered Friday, the dollar firmed and silver gave back ground with it.

There is no clean trend in the currency right now. Rate expectations pull one direction, intervention risk pulls the other. That creates a choppy environment where silver can get a strong one-day move and lose half of it the next morning.

The clean trade for the bulls is all three moving at once: September odds falling, yields dropping and the dollar breaking lower. Silver does not need the full package every session. But if the long end stays above 5%, the dollar has to give. Otherwise buyers have no room to work.

Payrolls Friday Settles the Week

Payrolls Friday is the one number that can reprice September and move the dollar in a clean direction. Everything before it builds the narrative.

Fed speakers are back this week with the committee split out in the open. The three dissenters can explain publicly why they voted for action. Any speech leaning hard on inflation or wages can lift September odds and put a bid back under the dollar.

The labor data lands in sequence. Tuesday’s JOLTS report provides the first read on job openings. Wednesday’s ADP number gives another signal. Both can move yields ahead of the main event.

Strong job growth with firm wages is exactly what the dissenters need to build the case for September. That would send yields higher, firm the dollar and hand control to silver sellers.

The bulls need a miss. Slower wage growth, rising unemployment, or a headline that comes in below consensus pulls September odds back down and weakens the dollar. That is the only setup where silver gets room to extend last week’s rally.

What to Watch

Three dissenters, a 30-year yield above 5.20% for the first time since 2007, and a Fed Chair who will not tell you what September looks like. Silver got a one-day reprieve when the dollar sold off. The bond market took it back. That is the problem. Every dollar decline runs straight into a wall of rising long-end yields, and until those yields roll over, rallies in this metal are borrows, not keeps.

Friday’s payrolls number is the only release this week that can actually reprice September in a lasting way. A miss below consensus with cooling wages gives the dollar bears something real to trade. Firm job growth hands Hammack and Logan and Kashkari the labor data they need to push the committee toward action.

Technically, traders are eyeing the long-term 50% level at $60.835 for direction. Overcoming it could lead to a test of the 52-week moving average. A failure to extend a rally over the pivot could lead to a retest of the July bottom at $54.78.

More Information in our Economic Calendar.