The price of silver (XAG/USD) has fallen below the key level of $30.00 in the European session on Tuesday. This decline is largely attributed to the rebound of the US Dollar (DXY) as traders exercise caution ahead of the release of the US Nonfarm Payrolls (NFP) data for May. This data will provide insights into whether the Federal Reserve (Fed) will consider lowering interest rates from their current levels at the September meeting.
The US Dollar Index (DXY) has bounced back after dropping to a multi-week low near 104.00. The strengthening of the US Dollar has made dollar-denominated commodities like Silver less appealing as they become more expensive.
Speculation regarding the Fed’s decision to reduce interest rates in September has increased due to recent US economic data showing signs of a slowdown in economic growth. The US ISM manufacturing PMI revealed a contraction in factory activity for the second consecutive month, along with a bleak demand outlook and slower expansion of input prices. Additionally, the US Q1 Gross Domestic Product (GDP) was revised downwards to 1.3% from the initial estimate of 1.6%.
Investors are keeping an eye on the JOLTS Job Openings data for April, which is expected to be released at 14:00 GMT. The forecast suggests a decline in the number of job openings compared to the previous reading.
From a technical analysis perspective, the price of Silver weakened after breaking down from the Double Top chart pattern that formed at a multi-year high of $32.50. This breakdown occurred after the price fell below the May 24 low near $30.00, signaling a bearish reversal. The asset has also moved below the 50-period Exponential Moving Average (EMA) around $30.80, indicating a shift to a bearish short-term trend. The 14-period Relative Strength Index (RSI) has entered the bearish range of 20.00-40.00, suggesting a downside momentum.
Overall, the price of silver has faced downward pressure as the US Dollar gained strength amid uncertainty surrounding the upcoming US NFP data and speculation regarding potential interest rate cuts by the Federal Reserve. Investors are closely monitoring economic indicators to gauge the future direction of silver prices, with technical analysis pointing towards a bearish trend in the short term.
