Silver Holds $38.04 as Dollar Surge and Fed Anxiety Cloud Rebound
Silver is getting squeezed. The US Dollar Index (DXY) has rallied 4 days in a row and is near 98.70, and risk appetite has shifted big time.
Quick overview
- Silver is facing short-term pressure due to a strong US Dollar Index and shifting risk appetite.
- Despite recent consolidation, silver is struggling to gain momentum ahead of key US economic data.
- The $38.04 support level remains intact, with signs of stability indicated by higher lows and rejection wicks.
- Market sentiment will be influenced by the Federal Reserve's upcoming decisions, impacting silver's potential for recovery.
Silver is getting squeezed. The US Dollar Index (DXY) has rallied 4 days in a row and is near 98.70, and risk appetite has shifted big time, leaving silver vulnerable to a short term pullback. The strength in the Greenback is due to a combination of improving trade sentiment (thanks to the new US-EU tariff deal) and uncertainty ahead of the Federal Reserve’s rate decision.
While gold has gotten all the headlines for falling to a near 3 week low, silver has quietly gone into consolidation mode and can’t get any momentum going with the macro backdrop shifting. Traders are hesitant to add exposure ahead of key US economic data, including the Fed’s statement, PCE inflation numbers and July’s jobs report – all of which will shape rate expectations into September.
At the same time, easing geopolitical tensions and global sentiment have taken the edge off safe haven demand and silver is lagging behind the broader risk on rally in equities and industrial metals.
Key Support Zone Holds as RSI Shows Early Buy Signal
Despite the macro headwinds, silver (XAG/USD) is showing signs of stability on the charts. The $38.04 zone, the key demand area that triggered the July breakout, is still holding as support. Bulls have defended this zone multiple times over the past 48 hours, forming higher lows and rejection wicks that show buyers are still around.
Technically, momentum is capped below the 50 period Simple Moving Average (SMA) at $38.70. This moving average has been dynamic resistance in recent sessions, capping upside rallies.
There is however a glimmer of hope from the Relative Strength Index (RSI). The 14 period RSI is bouncing off oversold territory, currently at 43.42 with the signal line at 37.59. This early divergence suggests selling pressure may be easing.
Levels to Watch:
- Immediate Resistance: $38.74 and $39.45
- Immediate Support: $38.04, then $37.56 and $37.13
- Bullish Trigger: Close above $38.74
- Bearish Risk: Break below $38.04 could go to $37.13
Next up will be the Fed’s tone. A hawkish bias will keep the dollar strong and silver under pressure. A dovish pivot or softer data will bring in safe haven flows and give silver room to bounce.
For now silver is in a short term correction, holding above a key support but not confirming the reversal. Watch price action at $38.74, a break above will get the bullish momentum going into August.
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