Silver Decline: Navigating Dollar Surge & Rate Cut Talks
XAG/USD experiences a decline amidst a surge in the US Dollar and ongoing discussions about potential rate cuts.
FUNDAMENTAL OVERVIEW:
- Silver declines as the dollar and Treasury yields rise.
- Uncertainty in the market intensifies with speculations of Fed rate cuts.
- The ECB’s hesitancy towards rate cuts further accentuates the bearish outlook.
The US Dollar is reaching a 10-day high and discussions about potential rate cuts by the Fed diminish the global attractiveness of silver amid surprising economic data.
On Tuesday, silver markets faced pressure, sandwiched between a strengthening U.S. dollar and surging Treasury yields. The focus shifts to impending speeches by Federal Reserve officials, as traders anxiously await hints regarding potential rate cut plans.
The U.S. dollar index reached a 10-day peak, diminishing silver’s appeal to holders of other currencies. Concurrently, U.S. 10-year Treasury yields surpassed the 4% mark. The dollar’s surge is linked to speculations about potential rate cuts by the Federal Reserve, amid a week filled with influential data that might influence global central bank determinations.
Anticipations of near-term Federal Reserve rate cuts, previously subdued, have been reignited by unexpected December U.S. producer price data. Current market probabilities indicate a 70% likelihood of a 25-basis point cut in March, an increase from last week’s 63%. Forecasts now incorporate a total of 160 basis points in rate cuts for the year, up from the previous estimate of 140.
Investor focus is concentrated on speeches from the Federal Reserve, particularly the forthcoming address by Christopher Waller. Waller’s prior dovish remarks sparked market rallies, and his latest perspectives could shape expectations for a March rate cut, thereby influencing U.S. bond yields and movements in the dollar.
XAG/USD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
XAG/USD is currently trading within a down channel.
XAG/USD is positioned below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Selling zone, while the Stochastic oscillator suggests a Negative trend.
Immediate Resistance level: 23.31
Immediate support level: 22.82
HOW TO TRADE XAG/USD
After a sharp ascent, XAG/USD encountered resistance, leading to a decline. Presently, it has breached the low of the previous day, forming an inverted cup & handle pattern. It is currently approaching a crucial support zone, and a break below this level could indicate potential further downside.
TRADE SUGGESTION- STOP SELL– 22.70, TAKE PROFIT AT- 21.92, SL AT- 23.32.