Silver prices (XAG/USD) are on a downward trajectory, reaching a weekly low near $22.70 following the Federal Reserve’s neutral interest rate guidance for the upcoming March monetary policy meeting. Despite keeping interest rates unchanged within the range of 5.25-5.50%, as anticipated, the Fed has deferred expectations for rate cuts in March.
The divergence in market reactions is evident as equities and risk-associated currencies respond differently; S&P500 futures display positivity, while the latter category experiences notable losses. This discrepancy emerges in the aftermath of Fed Chair Jerome Powell’s monetary policy statement, which refrains from specifying the timing of potential rate cuts.
The US Dollar Index (DXY) continues its ascent, reaching approximately 103.80. The Fed’s reluctance to speculate on rate cuts until there is increased confidence in sustained inflation returning to the 2% target bolsters the dollar’s position.
Investors are now turning their attention to the Institute of Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) for December, scheduled for release at 15:00 GMT. Market expectations point to a decline in the Manufacturing PMI to 47.0, compared to the previous reading of 47.4.
Looking ahead, the focus will shift to the Nonfarm Payrolls (NFP) data for January, set to be unveiled on Friday. The weak groundwork established by Wednesday’s ADP Employment Change data, which reported a hiring figure of 180K, significantly lower than the previous addition of 216K, has fueled concerns among investors. The Unemployment Rate is expected to rise to 3.8%, compared to December’s reading of 3.7%.
In terms of technical analysis, the silver price has formed an Evening Star candlestick pattern on the daily timeframe, signaling a bearish reversal. Failing to sustain above the 20-day Exponential Moving Average (EMA) around $23.00, the asset faces downward pressure. The 14-period Relative Strength Index (RSI) oscillates within the 40.00-60.00 range, indicating a sideways trend in silver prices. Investors are advised to closely monitor these technical indicators for potential market developments.
