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16 Jan 2024

Silver Price Analysis: XAG/USD retreats on USD strength, $22.50 is a key support

  • Precious metals depreciate with the US Dollar rallying as investors pare back bets of March cuts.
  • The rising geopolitical tensions are increasing support for the safe-haven USD.
  • XAG/USD has a key supporter level at $2250.


Silver (XAG/USD), like all precious metals, is depreciating today as the US Dollar regains lost ground. The combination of dwindling Fed rate cut hopes and higher demand for safe assets amid the increasing geopolitical tensions is underpinning a significant USDollar recovery.

A slew of ECB speakers playing down hopes of immediate rate cuts have forced investors to rethink their bets on Fed easing in March. Later today Christopher Waller, a hawkish Fed Board member is likely to reinforce that view ahead of Wednesday’s US retail sales data.

Beyond that, news that Houthis have extended their targets to US and UK vessels, in retaliation for this weekend’s attacks, has increased risk aversion. The unstable situation in the Red Sea is likely to boost transport prices, phishing inflation higher in the mid-term and pose a challenge for the major central banks.

In this context, the US Dollar is trading higher, fuelled by higher US Treasury yields, in the detriment of the yieldless metals.

XAG/USD has an important support level at $22.50

From a wider perspective, the pair is trading within a falling triangle, with bears focusing on the $22.50 support area. Below here, more sellers might come along, increasing negative pressure towards $21.90 ahead of the $20.70 level.

On the contrary, a bullish reaction above $23.53 would ease downside pressure and expose the $24.60 level.

Technical Levels to Watch

 

 

Jan 16, 2024

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