Silver Price Analysis: XAG/USD fails to break above 21DMA, but still buoyant in $22 area amid weakening buck

• Silver has pulled back to the $22.00 area from an earlier failed test of the 21DMA at $22.20.
• XAG/USD is still up over 1% on the day and more than 7.5% versus recent lows in the mid-$20.00s.
• Dollar weakness is driving the ongoing rebound, though there could be a recovery this week amid more expected Fed hawkishness.

Spot silver (XAG/USD) has pulled back from earlier session highs in the $22.20 per troy ounce area after failing a test of the 21-Day Moving Average, though continues to trade with gains of about 1.2% on the day (over 25 cents) amid a continued weakening of the US dollar at the start of the week. For now, XAG/USD is holding onto the $22.00 level and the uptrend that has been in play over the past ten days that has seen the precious metal bounce more than 7.5% from multi-month lows in the mid-$20.00s remains intact.

The main driver of this recent recovery has been the US Dollar Index’s (DXY) sharp pullback from the multi-decade highs it printed above 105.00 earlier in the month. Since 13 May, the DXY has dropped more than 2.5% from these highs to the low-102.00s, despite Fed policymakers sounding exceedingly hawkish last week in their intent to continue pressing ahead with rate hikes to tame rampant inflation, even in the face of a weakening economy/stock markets.

Given the Fed’s role as a key driver of upside in the buck over the last few months, analysts are not unsurprisingly questioning how much further this dollar pullback has to run. Surely dip-buyers will come back in at some point, they question. If there is a dollar recovery this week, that would be bad for XAG/USD. Its failure to get above its 21DMA may prove pivotal (failure at a major moving average is often seen by technicians as a bearish sign.

This week's economic events arguably present two-sided risks for XAG/USD. On the one hand, there will be plenty of Fed speak as well as the release of the May meeting minutes and the tone is expected to be as hawkish as ever. On the other hand, US (and global) flash May PMIs on Tuesday plus Thursday’s second estimate of Q1 US GDP growth may combine to trigger fresh concerns about US (and global growth), which could offer silver some safe-haven support, especially if it is deemed as dampening long-term Fed tightening prospects.