- On Tuesday, the white metal rose nearly 2% in a mixed market environment.
- Geopolitics, mixed US inflation data and the Covid-19 outbreak in China are driving silver.
- Silver Price Forecast (XAG/USD): Bullish bias but about to reach overbought levels.
Silver (XAG/USD) extended its rally in the North American session, trading above the April 11 cycle high of $25.37, amid a mixed market mood courtesy of the Russo-Ukrainian crisis, higher-than-expected US inflation expected and the China coronavirus outbreak. XAG/USD is trading at $25.58.
Fighting between Russia and Ukraine, strong inflation in the US and the outbreak of Covid-19 in China lift precious metals
Global stocks are trading mixed, with European stocks down while their US counterparts are up. Overnight, Ukrainian President Zelenskyy reported that Russia could use chemical weapons, while US Pentagon press secretary Kirby said that the US is aware of this, but that will continue to monitor the situation. On the Russian side, President Vladimir Putin said there is no doubt that the military operation in Ukraine will achieve its goals. Also, earlier in the American session, Russian President Putin added that talks with Ukraine are at an impasse.
Meanwhile, the Covid-19 outbreak in China helped push down oil prices but kept close to 25 million people on lockdown.
Aside from this, the US economic docket reported US inflation for March. The general figure rose 8.5% y/y, higher than the 8.4% estimated by analysts, while the so-called Core CPI, which excludes volatile elements, expanded 6.5%, lower than the 6.7% expected
The initial market reaction was that the dollar fell below the 100,000 mark, while US Treasuries fell as investors assessed that the March reading could be the peak of US inflation. .
Meanwhile, money market futures maintain their aggressive Federal Reserve hike forecasts at 0.50%. The odds show a 94% chance that the Federal Reserve will raise the Federal Funds Rate (FFR) to 1% at its May meeting.
Silver Price Forecast (XAG/USD): Technical Outlook
The daily chart of XAG/USD confirms that silver has a bullish bias. The daily moving averages (DMAs) are below the spot price, although it is worth noting that the 200-$23.90 DMA is trapped between the 50-$24.56 DMA and the 100-DMA. at 23.72$.
Silver’s 1 hour chart bias is in line with the daily chart and the uptrend is intact. The price action of the last two candles shows that the rally is overextended, further confirmed by the Relative Strength Index (RSI) at $67.92, close to reaching overbought conditions.
To the upside, XAG/USD’s first resistance would be the confluence of the March 24 cycle high and the R2 pivot point around the $25.75-$85 range. A break of the latter would expose the psychological mark at $26.00, followed by the R3 pivot at $26.12.
On the downside, the first support for XAG/USD would be the R1 daily pivot at $25.40. Once cleared, the next support would be the Mar 31 confluence and daily pivot in the $25.09-05 range, followed by the 50 hourly SMA at $24.97. A decisive break would expose a solid support area near the confluence of the 100, the 200 hourly SMA and the S1 pivot point around $24.68-$72.
Technical levels
Source: Fx Street
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