Silver Price Analysis: XAG/USD rises amid USD weakness ahead of FOMC decision

• XAG/USD gained ground and rose $24.90, showing 1% gains.
• The USD DXY trades soft near 101.10, while US Treasury yields are falling.
• Markets await a 25 bps hike by the Fed; messaging will be critical.

On Wednesday, the XAG/USD Silver spot price capitalised on the USD softness and falling US yields and jumped near the $25.00 area.

Ahead of the Federal Reserve (Fed) decision, the USD is trading soft, with the DXY index setting a consecutive day of losses after five straight days of gains. In addition, the 2-year American bond yield stands neutral at 4.88% and the 5 and 10-year rates fell to 4.14% and 3.87%, respectively, allowing the XAG/USD to gain traction. 

Regarding the decision, markets have already priced in a 25 basis point (bps) hike, and the focus is on the Fed’s posture regarding forward guidance. Chair Powell commented in June that the considered “prudent” additional hikes but that monetary policy decisions will remain data dependent. As for now, according to the World Interest Rate Possibility (WIRP) tool, markets discount 20% odds of a hike in September and then 45% probabilities in November.

XAG/USD Levels to watch

The daily chart shows that the XAG/USD's technical outlook is neutral for the short term as indicators have turned somewhat flat, awaiting a catalyst. The Relative Strength Index (RSI) has a slight positive slope, while the Moving Average Convergence Divergence (MACD) prints fading green bars. However, the 20 and 100-day Simple Moving Averages (SMA) have already performed a bullish cross which could offer critical support to the grey metal. Traders should pay attention to these movements.

Support levels: $24.30, $24.00, $23.90 (20-day SMA).

Resistance levels: $25.00, $25.30, $25.50.

XAG/USD Daily chart