Silver (XAG/USD) Holds $42 After Fed Cut — Breakout Rally or Bull Trap?
Silver is at $42.36 after rebounding from the 50-day SMA at $41.80. The Fed cut rates for the first time since December and Powell cited...
Quick overview
- Silver is currently priced at $42.36 after rebounding from the 50-day SMA of $41.80, supported by lower interest rates and increased industrial demand.
- The geopolitical easing between Russia and Ukraine has diminished silver's appeal as a safe-haven asset.
- Technical indicators show bullish momentum, with support at $42.00 and resistance levels at $42.53 and $42.97.
- Traders are advised to maintain long positions as long as silver stays above the trendline, with defined risk parameters.
Silver is at $42.36 after rebounding from the 50-day SMA at $41.80. The Fed cut rates for the first time since December and Powell cited weakness in the labor market. Lower rates reduce the opportunity cost of holding silver, a non-yielding asset, and boost demand.
Industrial demand is a big tailwind. Photovoltaics in China are dominating silver consumption and the Saudi sovereign wealth fund has recently added to silver ETFs. A weaker US Dollar outlook has improved sentiment across the commodities complex.
But geopolitical easing is a counterweight. A more constructive tone between Russia and Ukraine, as seen in comments from Trump and Starmer, has taken away from silver’s safe-haven appeal.
[[XAG/USD-graph]]
Silver Technicals
Silver is respecting the trendline from late August, a series of higher lows. Buyers are stepping in at $42.00 where the candlesticks show long lower wicks – dips are being absorbed.
Momentum is supporting this view:
- RSI 58, recovering from oversold.
- Bullish engulfing candle, often a precursor to more upside.
- No bearish divergence to challenge the trend.
First resistance at $42.53, then $42.97 and $43.44. Support at $42.00, then $41.36. A break below $41.36 could shift sentiment to $40.72 and $40.15.
Trade Setup and Risk
Traders can be long as long as silver holds above the trendline. A long entry at $42.00-$42.10 with stops at $41.36 offers defined risk. Targets are $42.97 and $43.44, in line with the bigger picture.
Key points:
- Above $42 holds the bias.
- Break above $42.53 could trigger $43.50.
- Below $41.36 and it’s sellers.
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