Silver Price Forecast: XAG/USD bounces off weekly lows and aims to re-test the $22.00 figure

• Silver cuts some of its weekly losses but stays losing 1%.
• Risk-aversion underpins the non-yielding metal, alongside the US Dollar
• Positive US economic data keep the greenback tilted to the upside.
• Fed policymakers see 50 bps rate hikes in June and July.
• Silver Price Forecast (XAG/USD): Tilted downwards, though a break above $22.44, would open the door towards the 50-DMA.

Silver (XAG/USD) snaps two days of losses and rallies above 1.50% in the day amidst a risk-off trading session, courtesy of increasing worries that restrictive monetary policies would threaten to bring the US economy into a recession. At $21.86, XAG/USD is bouncing from weekly lows at around $21.43 as XAG bulls prepare to re-test the $22.00 mark.

The white metal prices are rallying, despite higher US Treasury yields. The rate of the US 10-year T-note is advancing almost ten bps and sits at 2.949%, failing to undermine precious metals. Nevertheless, global equities fall, attributed to higher global bond yields.

Sentiment remains dismal courtesy of the increase of hostilities in the Ukraine-Russia war. Russia’s military advanced in an industrial city, according to Reuters. Meanwhile, the US is preparing to send additional military equipment to Ukraine.

In the meantime, the greenback continues its recovery during the New York session. The US Dollar Index, a measurement of the buck’s value against a basket of six currencies, climbs 0.77%, and sits at 102.557, a level last seen on May 23.

Data-wise, a busy US economic docket featured May’s US ISM Manufacturing PMI, JOLTs openings, and some Fed speakers. The ISM Manufacturing PMI came at 56.1 vs. 55.4 in April, while expectations were near 54.5. Meanwhile, the US JOLTs report showed that openings in April dropped from 11.9 million in March to 11.4 million, a relief for employers who struggle to contract or keep workers.

The St. Louis Fed President James Bullard said that “The current US macroeconomic situation is straining the Fed’s credibility with respect to its inflation target.” Furthermore, he added that the US labor markets and the US economy remain robust, but Russia’s invasion of Ukraine and a sharp slowdown in China means risk remains “substantial.”

Earlier in the day, the San Francisco Fed President, Mary Daly, said that she sees a couple of 50 bps rate hikes and emphasized the Fed’s need to get expeditiously to neutral. She added that the central bank needs to be prepared to do whatever it takes to tame inflation, though it needs to be ready to stop hiking rates if needed.

Silver Price Forecast (XAG/USD): Technical outlook

XAG/USD remains tilted to the downside, further confirmed by the daily moving averages (DMAs),  residing above the spot price. If XAG/USD bulls would like to regain control, they would need a break above May’s 27 high at $22.46. Once cleared, that could pave the way for a test of the 50-DMA at $23.38. Otherwise, XAG/USD would remain vulnerable to further selling pressure, as sellers would look for rallies to enter at a better price. In that case, the XAG/USD first support would be June 1 low at $21.43. Break below would expose May’s 19 swing low at $21.28, followed by the YTD low at $20.45.

Key Technical Levels