Silver Price Forecast: XAG/USD regains $23.00 around 11-week low amid sluggish markets, US data eyed

• Silver bounces off four-month-old ascending support line after six-day downtrend.
• Off in Japan, absence of major news and cautious mood ahead of the Fed’s preferred inflation gauge restrict market moves.
• USD strength, covid woes in China keep sellers hopeful.

Silver (XAG/USD) prices challenge the previous six-day downtrend following a bounce off the short-term key support line while defending the $23.00 during Friday’s Asian session. In doing so, the bright metal rebounds from the lowest levels since February 11 by picking up bids to $23.15 by the press time.

With the US Dollar’s rally to a two-decade high, the XAG/USD recently witnessed a heavy downturn due to its inverse relationship with the greenback.

Also exerting downside pressure on the silver prices are the fresh covid-led lockdowns in China. This could be linked to the bright metal’s industrial usage and Beijing’s stand as the world’s biggest industrial player.

Additionally challenging the metal are the geopolitical fears emanating from Russia and the global central bankers’ rush towards policy normalization (ex-China and Japan).

Amid these plays, traders rush to the US dollar in search of safety. However, the US Dollar Index (DXY) recently rally to 20-year high finds headwinds amid an absence of bond moves in the Asia-Pacific session, due to Japan’s off. Also challenging the USD bulls, as well as supporting silver buyers, is the cautious mood ahead of the Fed's preferred inflation gauge, namely the US Core Personal Consumption Expenditures Price Index.

Forecasts suggest the US Core PCE inflation data ease to 5.3% YoY versus 5.4% prior, which in turn may add to the pullback moves of the US dollar if easing more than expected. However, any further strength in the US inflation gauge may not hesitate to propel the DXY towards a fresh multi-month high due to the current greenback demand amid a risk-off mood and hawkish Fed signals.

Technical analysis

Although an upward sloping trend line from mid-December challenges silver sellers around $22.90, bearish MACD signals and sustained trading below the 200-DMA level, at $23.80 by the press time, restricts the XAG/USD bulls from entering the game.

Silver: Daily chart

Trend: Bearish