Silver fell despite a weaker US Dollar on Wednesday, as traders held onto expectations that the Federal Reserve will keep policy tight. Soft June inflation data cooled bets on an imminent rate hike but left the Fed’s hawkish stance intact.
Silver traded on the back foot on Wednesday, struggling to capitalize on a weaker US Dollar as hawkish Federal Reserve expectations kept bears in control. XAG/USD traded around $57.55, down 1.90% on the day.
Soft inflation, unmoved Fed
Both the US Consumer Price Index and Producer Price Index for June broadly missed expectations, reducing bets on an imminent Fed interest rate hike and pressuring the US Dollar. The US Dollar Index traded around 100.46, easing from an intraday high of 101.03.
But the readings did not materially change the Fed’s hawkish outlook. Inflation risks persist as Oil prices climb following renewed fighting in the Middle East, keeping a rate hike later this year on the table.
Cook keeps the door open
Fed Governor Lisa Cook said inflation expectations remain anchored, though she cautioned that this depends on the right policy stance and warned the Fed “can’t take its eye off the ball.” She said there are reasons to expect disinflation but noted price pressures could persist because of tariffs, the Middle East conflict and strong investment in artificial intelligence.
Expectations that the Fed will keep rates elevated or even raise them remain a major headwind for Silver, as higher borrowing costs increase the opportunity cost of holding the non-yielding metal.
Charts point lower
On the 4-hour chart, XAG/USD holds a bearish bias, trading below its 50-, 100- and 200-period Simple Moving Averages. The Relative Strength Index sits at 37, just above oversold territory, hinting at more downside.
Resistance sits near the 100-period SMA at $59.42 and the 50-period SMA at $59.57, with the 200-period SMA farther off at $64.18. On the downside, buyers are trying to build a base in the $55.50-$56.00 region, and a break below it could open a deeper decline.
Source: FXStreet
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