- Silver falls as the American session ends.
- The Russia-Ukraine conflict and the Fed’s monetary policy decision boost US Treasury yields and weigh on silver.
- XAG/USD Price Forecast: Bullish Bias, But Wednesday’s Price Action Will Be Tight, Ahead of FOMC.
Silver (XAG/USD), despite still trading at a loss, bounced off the 78.6% Fibonacci retracement, a solid buy zone, and pushed XAG/USD below the $25.00 area, also converging with the 61.8 Golden Ratio %. At time of writing, XAG/USD is trading at $24.87, down 0.67%.
Geopolitical tensions and the FOMC monetary policy meeting boost the dollar
Following last week’s rally in XAG/USD, which saw a jump from $25.00 to yearly highs around $26.94, silver was expected to post a mean reversion move that could push the white metal lower. a retest of 2022 highs. Meanwhile, the Russia-Ukraine talks, while reported as “positive” in recent days, were downplayed by Russian President Vladimir Putin, saying kyiv is not serious about the search for a mutually acceptable solution.
XAG/USD jumped on the headline from $24.70 to daily highs around $25.05 but stabilized around the $24.80-90 area as Federal Reserve monetary policy looms.
The US Federal Reserve will raise 25 bps on Wednesday
US Treasury yields trimmed earlier losses and ended in the green, with the 10-year T-bond yield at 2.149%, barely flat but reflecting the Fed’s first rate hike.
On Wednesday, the US central bank is widely expected to raise rates for the first time in three years, which would leave the fed funds rate at 0.25%. It would be followed by Fed Chairman Jerome Powell’s press conference, in which he would be asked about the impact of Russia and Ukraine on the US economy.
It should be noted that the Fed would reveal the Summary of Economic Projections (SEP) and the update of the so-called dot-plot, which reflects the monetary policy projections of the board.
XAG/USD Price Forecast: Technical Outlook
On Tuesday, silver visited the 78.6% Fibonacci retracement, a solid demand level for the white metal, just before crossing previous January 20 support/resistance high around $24.70. It is worth noting that the price of XAG/USD is above the daily moving averages (DMA), and while the 50 DMA is between the 200 DMA (top) and 100 DMA (bottom), it is accelerating to cross above the 200 DMA, which could cause a golden cross.
That being said, the bias for XAG/USD is to the upside, and its first resistance level would be $25.00. A decisive breakout would expose the confluence of the 50% Fibonacci level and the 25th Nov 2021 high at $25.39, followed by $26.00.
Technical levels
Source: Fx Street
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