Silver (XAG) Daily Forecast: Eyes $28.65 Amid 50 and 200 EMA Crossover

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Published: May 6, 2024, 06:54 GMT+00:00

Key Points:

Sluggish U.S. job growth boosts hopes for a Fed rate cut, lifting Silver's prospects.
Silver navigates resistance at $27.40; a break could target highs near $28.67.
Dovish Fed signals and soft job data underpin Silver's rally above $26.82.

Market Overview

Despite easing Middle East tensions and the risk-on market sentiment, the Silver price (XAG/USD) started this news week on a bullish track and remained well bid around the 26.9455 level, hitting the intraday high of 27.0015 level.

However, the reason for its downward trend could be associated with the previously released weaker-than-expected US employment reports. These reports have boosted the probabilities of a September rate cut from the US Federal Reserve (Fed) and contributed to the declines in the US dollar. The bearish US dollar was seen as one of the key factors keeping the silver price lower.

In contrast, the easing fear of geopolitical tensions in the Middle East, particularly regarding the Iran-Israel conflict, and the risk-on environment could limit further gains in safe-haven gold. Investors are closely watching Fed speeches this week. Dovish remarks from officials like Thomas Barkin and John Williams could drive gold prices higher, impacting the XAG/USD exchange rate.

US Economic Data Sparks Rate Cut Speculation, Bolstering Silver Prices

On the data front, US Nonfarm Payrolls increased by 175,000 in April, falling short of the expected 243,000 and showing slower growth compared to March’s revised 315,000. The Unemployment Rate also rose slightly to 3.9% from the previous 3.8%, while Average Hourly Earnings decreased to 4.0% year-over-year in April from 4.3% in March.

Moreover, the US ISM Services PMI fell into contractionary territory, dropping to 49.4 in April from 51.2 in March, below the anticipated 52.0. Fed Governor Michelle Bowman expressed concern about prolonged inflation and indicated readiness to raise rates if inflation doesn’t ease.

Despite the jobs report not being as strong as expected, a top economist from the Chicago Fed thinks it’s still pretty good. This suggests that the Fed’s current approach to controlling inflation, which involves keeping interest rates high, is working. However, after the jobs report was released, many investors started to believe there was a much higher chance that the Fed would cut interest rates in September.

According to the CME FedWatch tool, the probability of a September rate cut has increased to nearly 90%, up from 55% before the report. Therefore, the mixed economic data and growing expectations for a Fed rate cut in September have supported silver prices, as lower interest rates typically increase demand for silver as a safe-haven asset.

Silver (XAG/USD) Price Forecast

Silver Price Chart

Today, Silver (XAG/USD) shows a notable gain of 1.29%, with the price reaching $26.89185. This advance positions silver just above its pivotal point at $26.82, hinting at potential bullish momentum. If it sustains above this level, immediate resistance is seen at $27.40, followed by higher thresholds at $27.95 and $28.67. These levels will be crucial in determining whether silver can extend its upward trajectory.

Conversely, if the price falls below the pivot, it could face downward pressure with support at $26.05, $25.57, and $25.06, marking critical zones to watch for potential stabilization or further declines.

Technical indicators fortify this outlook; the 50-day and 200-day Exponential Moving Averages (EMAs) at $26.90 and $26.59, respectively, support the current price level. These indicators suggest a tight consolidation, making a breach above $26.82 significant for confirming further gains.

Conclusion: Silver appears poised for more gains, with a decisive move above $26.82 potentially igniting a push towards $28.67.

About the Author

Arslan Aliauthor

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.