Forex world

March 17, 2023

XAG/USD pares hefty weekly gains below $22.00

- Silver price bounces off intraday low, eyes the biggest weekly gain since late 2022.

- Strong yields probe XAG/USD bulls but the metal’s safe-haven status keep Silver price firmer.

- Market’s indecision about the next week’s Fed moves, lack of major data/events restrict immediate moves of the Silver price.

Silver price (XAG/USD) picks up bids to post a recovery from the intraday bottom to $21.80 during a sluggish Friday as the metal traders take a breather at the end of a volatile week amid a light calendar and mixed feelings. Even so, the XAG/USD appears well set to post the biggest weekly gain since the week starts from November 28.

The global policymakers’ efforts to push back the fears of the financial market crisis of 2008 gained little reception but manages to avoid any more casualties in the market and hence traders remain cautiously optimistic. However, the mixed US data join hawkish Fed bets to challenge the optimists.

The comments from Saudi National Bank's Chairman, Ammar Al Khudairy, conveying the “sound” conditions of Credit Suisse join the major US banks’ efforts to help California-based First Republic Bank to avoid a liquidity crunch to favor the risk-on mood. On the same line was the news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity, as well as Reuters quoting anonymous sources to confirm that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, US Treasury Secretary Janet Yellen’s assurance over the US banking industry’s health and European Central Bank’s (ECB) 50 bps rate hike, matching expectations, also favored the sentiment and allowed the latest run-up in the XAG/USD prices.

That said, Weekly Initial Jobless Claims dropped to 192K for the week ended on March 10 versus 205K expected and 212K prior whereas the four-week average figure dropped to 196.5K versus 197.25K prior (revised). Further, Housing Starts jumped to 1.45M in February from 1.321M previous reading and 1.31M analysts’ estimations while the Housing Starts jumped to 1.524M during the said month versus 1.34M expected and 1.339M prior. Additionally, the Philadelphia Fed Manufacturing Survey gauge came in as -23.2 compared to -14.5 consensus and -24.3 prior.

It should be observed that the latest reduction in the US inflation expectations per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data also favors the Silver price, by way of exerting downside pressure on the US Dollar.

While portraying the mood, US 10-year and two-year Treasury bond yields struggle for clear directions as the previous day’s rebound fails to supersede the two-week downtrend. However, Wall Street closed in the green with more than 1.0% gains by each of the benchmark indices while S&P 500 Futures print mild losses at the latest.

Elsewhere, headlines suggesting China’s sustained economic recovery, shared by Bloomberg, also challenge the Silver bears.

Looking ahead, metal traders should keep their eyes on the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Ahead of that, preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month will be important for clear directions.

Technical analysis

Unless crossing a convergence of the 50-DMA and 100-DMA, around $22.32 by the press time, the Silver price is likely to remain bearish. However, the early month’s swing high near $21.30 restricts the immediate downside of the XAG/USD amid bullish MACD signals and a steady RSI (14) line.


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