The silver spot price (XAGUSD) has recently dipped to levels not seen in two weeks. This drop comes amidst uncertainty surrounding the Federal Reserve’s rate cut schedule, which has overshadowed the safe-haven demand sparked by geopolitical tensions in the Middle East.
With recent robust economic indicators from the US signalling resilience in the face of higher interest rates, several Federal Reserve officials have advocated for patience in considering rate cuts, waiting for clear signs of inflation sustainably returning to its 2% target. Consequently, the US dollar has strengthened, exerting downward pressure on silver prices. However, it’s worth noting the latest Silver Institute report forecasts a surge in silver demand, projecting it to reach 1.2 billion ounces in 2024, the second-highest level on record, primarily fuelled by growing industrial demand.
On the 4H chart, a descending channel is present, but the price action is teasing at a potential breakout. Volumes have been declining, suggesting that the bearish run may have lost steam, with the RSI returning to neutral grounds.
If the price breaks through the dynamic resistance of the channel, the 25-SMA (green line) resistance could trigger a retracement. However, any movement higher could trigger a breakout above $22.479/ounce. The 100-SMA (orange line) then offers additional resistance near the Fibonacci midpoint at $22.702/ounce, while the 50-SMA (blue line) backs the 61.8% Fibonacci golden ratio near $22.835/ounce, creating a challenging barrier to cross in the upcoming sessions.
If the price remains below the 25-SMA, the bearish trend within the channel could continue. Support at $22.225/ounce and $22.051/ounce could then be of importance to prevent a steeper downtrend toward the neckline support established at $21.886/ounce.
The silver spot price has fallen toward two-week lows as the US dollar found strength on a hawkish tilt from the Federal Reserve. A breakout from the descending channel is on the cards if the price can clear the 25-SMA resistance in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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