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Silver Price Analysis: XAG/USD remains sideways at $21.00 despite US yields continuing to rise

  • The silver price maintains its previous gains, but remains at risk of closing the session below $21.00 a troy ounce.
  • The US ISM Manufacturing PMI missed estimates, although it did show some improvement.
  • Those responsible for the Federal Reserve insisted on the need to raise rates to the zone of 5.25% – 5.50%.

the silver It advances in the North American session after finding resistance above the $21.00 zone, although it is holding on to gains of 0.33%. Boosted by a weaker US dollar after data from the United States (US) missed estimates, the white metal extends its gains for two straight days. At the time of writing this report, the XAG/USD it trades around $20.90.

US manufacturing activity improved, but rising input prices dwarfed the data

Sentiment soured after the US manufacturing data. The ISM revealed that the manufacturing PMI for February came in at 47.7 points, below estimates of 48, although it seemed to stabilize as the previous month’s reading came in at 47.4 points. However, the price sub-component soared, reigniting inflation concerns among investors, as witnessed by US money market futures, where traders expect rates to rise as high as 550%, with no rate cuts in 2023.

A knee-jerk reaction sent XAG/USD falling from $21.11 to $20.89 a troy ounce. However, the fall in silver was limited by the dollar, which continued to weaken during the US session.

Earlier, Federal Reserve officials crossed the news and continued their hawkish rhetoric. Minnesota Fed President Neil Kashkari (voter) said interest rates should reach 5.4% in December and stay there. He also mentioned that he would consider raising rates by 25 or 50 basis points during the next Fed meeting.

Later, Atlanta Fed President Raphael Bostic commented that rates need to go up to 5% – 5.25% and stay there “well into 2024”.

The Fed’s hawkish rhetoric did not help the dollar, which, according to the Dollar Index, fell 0.46% to 104,471 points. By contrast, the 10-year US Treasury yield is up seven basis points, waiting to break above the 4% threshold, a headwind for precious metal prices.

XAG/USD Technical Analysis

The daily chart for Silver shows XAG/USD with a bearish bias. The downtrend is reinforced by the 20 day EMA crossing below the 200 day EMA, which could aggravate a test of the lows around $20.43. The XAG/USD rally over the past two days is supported by a technical signal, with the Relative Strength Index (RSI) breaking out of oversold conditions, triggering a buy signal. Failure to extend your gains above $21.00 could pave the way for a further decline.

The first support for XAG/USD would be the February 27 daily low at $20.56, which, once broken, could pave the way to the year-over-year low at $20.43. On the other hand, if silver stays afloat above $21.00, XAG/USD could test the February 24 high at $21.39.

What is there to watch out for?

Source: Fx Street

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