Silver prices (XAG/USD) are experiencing a sharp decline on Tuesday, falling below the key psychological support level of $30.00. This drop coincides with a rebound in the US Dollar (USD).
Market Forces:
- US Dollar Rebound: The US Dollar Index (DXY) is recovering after reaching multi-week lows, diminishing the appeal of dollar-denominated commodities like silver.
- Focus on US Nonfarm Payrolls (NFP): Uncertainty surrounding the upcoming US NFP data for May, which could influence Fed rate cut expectations, is contributing to market jitters.
- Lowered Fed Rate Cut Expectations: The recent US economic data, including a contractionary manufacturing PMI and a downward revision of Q1 GDP growth, has strengthened the possibility of a Fed rate cut in September.
- JOLTS Job Openings Data: Today’s release of the JOLTS data for April (expected to show a decrease in job openings) is another factor influencing market sentiment.
Technical Analysis:
- Double Top Breakdown: Silver’s breakdown of a Double Top chart pattern formed on a 4-hour timeframe, with a previous high near $32.50, suggests a bearish reversal.
- Short-Term Bearish Trend: The price falling below the 50-period EMA (around $30.80) further confirms a short-term downtrend.
- Bearish Momentum: The 14-period RSI dropping into the 20.00-40.00 range indicates downside momentum.
The combination of a stronger US Dollar and weaker economic data is putting downward pressure on silver prices. The technical indicators also point towards a potential continuation of the downtrend in the short term. Investors will be closely watching the NFP data release for further clues on the Fed’s monetary policy stance and its potential impact on the silver market.