Silver Price Analysis: XAG/USD plummets to near $23 amid upbeat labor market data

• Silver price plummets to $23 as the US labor market remains resilient.
• US Q2 Unit Labor Costs jumped to 2.2% vs. expectations and the former release of 1.6%.
• Silver price corrects vertically to near the 200-day EMA, which trades around $23.30.

Silver price (XAG/USD) corrected significantly to near $23.00 as United States labor market indicators outperformed expectations. The white metal faces selling pressure as the US Department of Labor reported that individuals claiming jobless benefits for the first time dropped to 216K for the week ending September 01 vs. expectations of 234K and the former release of 229K.

Meanwhile, Q2 Unit Labor Costs jumped to 2.2% vs. expectations and the former release of 1.6%. Decent wage growth would keep households’ disposable income higher and might eventually keep inflationary pressures stubborn.

The S&P500 opens on a negative note as the tight US labor market would allow the Federal Reserve (Fed) to keep doors open for further policy tightening. The Fed is widely expected to keep interest rates unchanged in September monetary policy. As per the CME Fedwatch Tool, traders see a 93% chance for interest rates to remain unchanged at 5.25%-5.50% in the September policy meeting.

The US Dollar Index (DXY) edges marginally lower from its five-month high of 105.10. However, the upside bias is still solid as the market mood is quite cautious. For further action, investors will focus on the Consumer Price Index (CPI) for August, which will be released next week.

Silver technical analysis

Silver price corrects vertically to near the 200-day Exponential Moving Average (EMA), which trades around $23.30. The white metal forms a Head and Shoulder chart pattern, which is a bearish reversal pattern. The neckline of the aforementioned formation is placed from June 22 low at $22.18.

The Relative Strength Index (RSI) (14) drops to near 40.00. A bearish impulse would be activated if it breaks below the same.

Silver daily chart