Silver bears looking for a significant retracement

  • Silver is on the verge of a retracement as it meets a wall of resistance.
  • Rates are the main theme in play, but traders should take note of the forthcoming bond supply.

XAG/USD was ending at the closing bell higher by 1.33% overnight.

The white metal rallied from a low of $24.9692 to a high of $25.6185 but is now trading down 0.1% in early Asia. 

It was a weak dollar story overnight as traders take note of the Federal Reserve's dovishness.

At the March meeting, the median forecast of Fed policymakers showed that the central bank did not expect to raise interest rates until 2024, as shown by yesterday's minutes. 

Overnight, Fed's Chair Jerome Powell reiterated the dovishness.

''Speaking at the IMF conference, Powell said that the Fed is very concerned about how the pandemic has hit lower-income workers most; that 9-10 million people remain out of work; and that the Fed will continue to provide aid to the economy until it is no longer needed,'' analysts at ANZ Bak explained. 

''In a nutshell, the Fed will want to see many months of consistent and substantial improvement in the labour market and inflation before thinking about withdrawing stimulus,'' the analysts added. 

Meanwhile, traders should take note that there is a massive $370 billion in Treasury supply looming over the next few weeks. Supply starts next week with the auction of $120 billion in 3-year, 10-year- and 30-year debt. 

With that being said, the eurodollar futures market, which tracks interest rate expectations, still has fully priced in a Fed hike by March 2023.

Silver technical analysis

XAG/USD is facing a wall of resistance as it meets the weekly 61.8% Fibonacci retracement of the prior bearish impulse’s range.

A 50% mean reversion of the daily impulse comes in at $24.2332 and it aligns with the neckline of the W-formation on the 4-hour chart.

With that being said, the 20 and 10 EMAs are diverging on the 4-hour chart and the conditions remain very much bullish there. 

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