The price of silver (XAG/USD) is on a downward trend for the third consecutive trading session, reaching near $28.20 as the US Dollar (USD) continues to strengthen amidst uncertainty surrounding upcoming US economic data releases.
The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, is approaching a two-week high of 102.00.
Investors are eagerly awaiting the US Nonfarm Payrolls (NFP) data for August, set to be released on Friday. This data will heavily influence market speculation regarding the potential size of an interest rate cut by the Federal Reserve (Fed) at their September meeting.
While the Fed is expected to initiate interest rate cuts this month, traders are divided on whether the cuts will be gradual or aggressive. In addition to the NFP report, investors will be closely monitoring the JOLTS Job Openings data for July and the ADP Employment Change data for August, scheduled for release on Wednesday and Thursday respectively, for further insights into the current labor market conditions.
Today, during the North American session, all eyes will be on the US ISM Manufacturing PMI data for August, slated for release at 14:00 GMT. The US Manufacturing PMI is projected to show an improvement to 47.5 from July’s reading of 46.8, although any number below 50.0 indicates a contraction.
Technical Analysis of Silver
The price of silver weakened after breaking down the Head and Shoulder chart pattern on a four-hour timeframe, with the neckline around $28.80. The declining 20-period Exponential Moving Average (EMA) near $28.80 suggests a bearish trend in the near term.
The 14-period Relative Strength Index (RSI) has entered the bearish range of 20.00-40.00, indicating a strong bearish momentum.
Four-Hour Chart of Silver
(Correction: The Fed is widely expected to begin reducing interest rates this month, not this week as previously mentioned)
Analysis and Impact:
The recent drop in silver prices due to the strengthening US Dollar and uncertainty surrounding the Fed’s interest rate cuts can have significant implications for investors. As silver is often viewed as a safe-haven asset, its price movements can reflect market sentiment and economic outlook. Investors should closely monitor upcoming economic data releases and Fed decisions to make informed decisions about their investment portfolios. Additionally, factors such as geopolitical events, interest rates, and industrial demand can also influence silver prices. Understanding these dynamics is crucial for investors looking to navigate the volatile precious metals market effectively.