The Silver Spot Price (XAGUSD) faced a tumultuous start to the new week, extending its decline by 1.77%, following a marginal gain that barely offset back-to-back losses last week.
The silver market, often viewed as a barometer of economic sentiment, is currently under the influence of a resurgent Greenback, which has strengthened by nearly 2% year-to-date against major currencies. This upward trajectory for the U.S. dollar is fuelled by robust economic indicators, with December’s retail sales surpassing expectations at an impressive 5.6%, coupled with an uptick in inflation to 3.4% from the previous month’s 3.1%. Traders recalibrated their expectations, trimming bets on an imminent rate cut from 76.9% to 53.8% in a week, according to the CME FedWatch Tool. This shift favours the Greenback, posing a challenge to the spot price.
Technical
The Silver Spot Price finds itself navigating a challenging landscape, dwelling below the 100-day moving average within a discernible downtrend.
From mid-December, it has oscillated within the defined boundaries of $22.502 and $24.598 per ounce, encountering a sharp downturn after testing the resistance level. A subsequent breach beneath the 100-day moving average led to a retest of the support at $22.502.
Intriguingly, signs of resilience emerged amid oversold Relative Strength Index (RSI) conditions at the support level. Thursday’s trading session witnessed a notable gain, carrying into the early hours of Friday. Should this upside momentum persist, attention will likely turn to the 23.60% Fibonacci Retracement level as a potential upside marker. Conversely, if bearish pressures prevail, the robust $22.502 per ounce level could serve as a steadfast foundation for the Silver Spot Price.
Summary
The Silver Spot Price grapples with a 1.77% decline this week amidst a resurgent Greenback and robust U.S. economic indicators. In this challenging environment, technical analysis reveals a precarious position below the 100-day moving average, with a pivotal battleground between $22.502 support and $24.598 resistance. With an ongoing rebound from the $22.502 foundation, the 23.60% Fibonacci Retracement level looms.
Sources: U.S. Bureau of Labor Statistics, CME, Reuters, TradingView
Piece Written by Nkosilathi Dube, Trive Financial Market Analyst
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