Silver Price Analysis: XAG/USD approaches oversold conditions amid USD strength

• XAG/USD lost more than 4% this week and fell to monthly lows near $22.65.
• The USD benefited due to a sour market mood.
• Markets try to decipher the next Fed movements while speakers deliver mixed signals.

On Tuesday, the XAG/USD continued its downward path and fell to its lowest since July 7th. The USD measured by the DXY trades strong above 102.50, but lower yields may cap gains. All eyes are now on inflation data on Thursday.

Federal Reserve (Fed) doves and hawks are battling it out publicly, leaving investors scratching their heads. Michelle Bowman pointed out that more increases will likely be appropriate. At the same time, John Williams showed himself comfortable with the Fed’s monetary policy, stating that the bank has the policy where it wants it to be. On Tuesday’s session, Thomas Barkin gave no highlights and said, “ I don't want to predeclare where rates will go.

According to the CME FedWatch tool, tightening expectations for the Federal Reserve remains low. The odds of a hike stand near 14% for the September meeting and rise near 30% in November. However, those odds will likely be impacted by inflation figures on Thursday, also dictating the pace for the bond market and the USD. It's worth noting that non-yielding metals tend to be negatively correlated with higher interest rates, so investors will closely monitor Thursday’s inflation data. 

In that sense, the Headline Consumer Price Index (CPI) index is expected to accelerate to 3.3% YoY and the Core CPI, which is seen falling to 4.7% in the same month.

XAG/USD levels to watch

With both Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) comfortably placed in negative territory on the daily chart, the XAG/USD sellers hold the upper hand. The downward slope of the Relative Strength Index (RSI) near 30.00 further reinforces this negative sentiment, as does the MACD, which displays red bars, indicating a strengthening bearish momentum. Additionally, the metal is below the 20,100 and 200-day Simple Moving Averages (SMAs), suggesting that the bears are firmly in control of the bigger picture, leaving the buyers with tasks to accomplish.

Support levels: $22.50, $22.30, $22.00. 

Resistance levels:  $23.20 (200-day SMA), $23.50, $23.70, $24.00.

XAG/USD Daily chart