- Silver price rebounds sharply from $26.30 as US manufacturing PMI contracts in April.
- Speculation on the Fed's interest rate outlook remains firm as manufacturing prices rose above 60.0.
- Investors await the Fed's policy decision for meaningful guidance.
The price of the Silver (XAG/USD) recovers strongly from the four-month low of $26.30 as the US Institute for Supply Management (ISM) has reported a weak manufacturing PMI report for April. The ISM reported that the manufacturing PMI falls sharply to 49.2 from the consensus of 50.0 and the previous reading of 50.3. Factory data remained below the 50.0 threshold, which in itself is a sign of contraction.
New order entries fell significantly to 49.1 from 51.4 in March, suggesting weak demand prospects, which could be seen as a consequence of the Federal Reserve (Fed) raising interest rates.
Despite the sharp drop in manufacturing PMI, the Fed is expected to support the “higher for longer” argument as manufacturing prices paid rose significantly to 60.9 from the estimated 55.0. Rising manufacturing prices are typically driven by increases in input prices and wages paid to workers, suggesting persistent price pressure.
Weak manufacturing PMI has weighed on the US dollar. The US Dollar Index (DXY) retreated from its three-week high at 106.50.
Meanwhile, the main event for investors will be the Federal Reserve's decision on interest rates, which will be announced at 18:00 GMT. Investors believe the Fed will keep interest rates in the 5.25%-5.50% range for the sixth consecutive time. The Fed is expected to maintain the status quo, so investors will focus on the interest rate guidance.
CME's FedWatch tool shows that policymakers will favor easing the tightening monetary policy framework from the September meeting. Therefore, the Fed will maintain a hawkish stance on short-term interest rates. Investors will be focused on whether the Fed will maintain its forecast for three rate cuts this year, as indicated by the March dot chart.
Silver technical analysis
The price of Silver declines towards the horizontal support drawn from the April 14, 2023 high around $26.09 on a daily time frame. The aforementioned support was a major resistance for the Silver price bulls. Uncertainty over Silver's short-term prospects is heightened as it has slipped below the 20-period EMA, which is trading around $27.20.
The 14-period RSI declines towards the 40.00-60.00 area, suggesting that the bullish momentum has faded. However, the long-term outlook remains stable.
Silver Daily Chart
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
