Silver price (XAG/USD) posts a fresh over six-month low at $60.74 during the Asian trading session on Wednesday. The white metal faces selling pressure as traders seem confident that the Federal Reserve (Fed) will deliver at least two interest rate cuts this year.
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 86%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.
Theoretically, higher interest rates by the Fed bode poorly for non-yielding assets, such as Silver.
Meanwhile, the rising US Dollar (USD) due to hawkish Fed bets is also hurting the Silver price. At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 101.50, the highest level seen in over a year. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
For more cues on the United States (US) interest rate outlook, investors await the Personal Consumption Expenditure Price Index (PCE) data for May, which will be published on Thursday. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% Year-on-Year (YoY) from 3.3% in April.
Silver technical analysis
Bias: XAG/USD trades lower at around $61.00, extending a bearish near-term bias as price holds well below the 20-day Exponential Moving Average (EMA) at $68.09.
Momentum: The metal continues to slide away from recent highs, and the Relative Strength Index (14) at 31.92 hovers just above oversold territory, suggesting persistent downside pressure even as the selloff begins to look stretched.
Support: The Silver price is expected to extend its decline toward the December 4 low at $56.47 if it slides below $60.00. A further decline below $56.47 would expose the asset to the psychological support of $50.00.
Resistance: On the topside, the 20-day EMA at $68.09 is the first meaningful resistance, and a recovery above this cap would be needed to ease the current downside control. Until that barrier is reclaimed, momentum favors further softness, with traders likely to fade rebounds while RSI remains depressed.
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