Silver Price Analysis: XAG/USD still struggling with selling pressure ahead of $23.00 area despite ongoing buck woes

• Spot silver prices continue to struggle to benefit from the latest USD slump, amid selling pressure in the $23.00 area.
• That despite a massive miss on expectations in the latest US ADP figures, which come ahead of Friday’s jobs report.
• Perhaps what XAG/USD needs is to clear the resistance area around $23.00 before a more substantial rebound can take place.

Spot silver (XAG/USD) prices continue to struggle to benefit from the latest US dollar slump, as spot prices continue to face selling pressure ahead of the $23.00 per troy ounce level. Indeed, since pulling back from earlier session highs in the $22.80s after failing to rally above the 50-day moving average at $22.86, the precious metal has traded in choppy fashion, even dipping below $22.50 at one point. At current levels in the $22.60s, it trades about 0.2% higher on the session. That despite a massive miss on expectations in the latest US ADP National Employment report, which showed private payrolls dropping by more than 300K in January versus forecasts for a 207K rise.

Though ADP hasn’t had the best track record as of late in predicting the official US payroll change number (out on Friday), it will push already very low expectations even lower. The rapid spread of Omicron over the past six weeks or so in the US has disrupted the usual labour market churn and slowed the pace of hiring. In light of this, markets have broadly ignored the latest ADP report and will likely ignore the headline NFP number on Friday (so long as it doesn’t deviate to massively from the roughly 150K expected job gain). Fed officials have flagged wage cost pressures as more important in the near-term to policymaking decisions, so Friday’s Average Hourly Earnings (AHE) growth metric will be the most closely followed aspect of the report.

If AHE follows in the footsteps of last week’s Q4 Employment Cost Index data by underwhelming expectations, the US dollar may gather fresh momentum. Spot silver’s failure to capitalise on the USD weakness that has already ensued this week raises questions about whether the aforementioned scenario would ultimately be a XAG/USD positive. Perhaps what XAG/USD needs is to clear the resistance area around $23.00 before a more substantial rebound can take place. Certainly, a rally above $23.00 would open the door to a run back towards $24.00. However, in the longer-run, in an environment where the Fed is moving towards tighter policy, the 200DMA may continue to provide a long-term ceiling, as has been the case since last August.