Silver (XAG/USD) remains stable on Friday, benefiting from a slight dip in the US Dollar (USD) following its recent strong rally. Currently, Silver is trading around $64.30 but is still on track for a weekly decline.
The easing of the US Dollar provides some relief, but the potential for significant gains appears limited. This is partly due to increased speculation surrounding another rate hike from the Federal Reserve (Fed), following last week’s 25-basis-point (bps) increase. Such higher borrowing costs generally impact non-yielding assets like Silver, making interest-bearing investments more attractive. This week, US Treasury yields reached new multi-year highs.
The CME FedWatch Tool indicates approximately a 66% chance of another rate hike during the October meeting. Fresh data next week on Personal Consumption Expenditures (PCE) inflation, ISM Manufacturing Purchasing Managers’ Index (PMI), and Nonfarm Payrolls (NFP) could sway these expectations.
Despite these fundamental challenges, the technical outlook for Silver appears somewhat promising. The momentum indicators are mainly neutral, indicating that neither buyers nor sellers have a firm grip, while XAG/USD continues to fluctuate within a range established over the past month.
Technical analysis
On the daily chart, Silver seems to be in a consolidation phase, moving between the narrower Bollinger Bands. This tight band spread suggests that volatility is limited, and a clearer directional movement may require a breakout from this current range.
The Relative Strength Index (RSI) is at 47, hovering around the midpoint, suggesting balanced momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) is slightly negative, signaling modest downside pressure within the broader range, as the Average Directional Index (ADX) indicates weak trend strength at 10.
Looking at the resistance levels, initial resistance lies around the Bollinger middle band near $65, followed by the upper band at $67. More significant supply might manifest at horizontal barriers of $70 and $75.
On the downside, immediate support is around the Bollinger lower band at $62, followed by horizontal support at $60 and then $55, where buying interest might emerge if the current consolidation breaks below.
