Silver Price Forecast: XAGUSD tumbles as soft US data spurs high US bond yields

Silver price is retracing from daily highs near the $18.70 region towards the $18.40 area. A mixed market mood, spurred by the Federal Reserve Open Market Committee meeting looming, alongside US corporate earnings and US GDP preliminary readings, expected to expand but at the brink of confirming a technical recession in the US, keep Silver prices heavy.

XAGUSD began the week trading around $18.60, climbed steadily near the R1 daily pivot at $18.84,  but dived below the S1 daily pivot and hit the daily low at $18.30, but had recovered some ground, meandering around the S1 pivot point at $18.40.

Despite weaker US data, safe-haven flows move towards the greenback

Late newswires confirmed that Gazprom has reduced the Natural Gas flows to 20% in the Nord Stream 1 pipeline, which triggered a jump in the UD Dollar Index to 106.420. In the meantime, US economic data further shows deterioration in the economy, as the US Dallas Fed Manufacturing Index collapsed -22.6 vs. -12.5 in July. That, alongside the US Chicago Fed National ACtivivity Indeed tumbling to -0.19 in June, keep recession fears lingering around investors’ minds. With the US Federal Reserve expected to hike 75 bps on Wednesday, the white metal is expected to accelerate its losses as higher US Treasury yields boost the appetite for the greenback.

Regarding the money market futures, expectations for a 75 bps interest rate rise by the Fed lie at a 75% chance, while estimations for a 100 bps increase are at 25%.

Talking about US Treasury yields, the 10-year benchmark note coupon edges up two and a half basis points, yielding 2.807%, while the US 2s-10s yield curve remains inverted for the sixteenth straight day, at -0.207%.

What to watch

On Tuesday, the US economic docket will feature CB Consumer Confidence, New Home Sales, and the beginning of the two-day US FOMC monetary policy meeting.

Silver Price Forecast (XAGUSD): Technical outlook

Silver price shows signs that the downtrend that accelerated since mid-April is losing steam, unable to crack the $18.00 barrier, which once cleared, would open the door for further losses, towards the June lows around $16.95. XAGUSD traders should notice that the Relative Strength Index (RSI) exited from oversold levels but is aiming lower, about to cross under the RSI’s 7-day SMA, opening the door for further downwards action.

Therefore, the XAGUSD’s first support would be the YTD low at $18.14. XAGUSD break below will expose $18.00, followed by a challenge of the $17.00, before refreshing 2-year lows around June 2020 lows at $16.95.