- Silver is falling sharply near a one-week high of $29.16 as the US dollar strengthens strongly.
- An unexpected decline in the Caixin manufacturing PMI in July also weighed on silver prices.
- The Federal Reserve signaled an interest rate cut in September on sinking inflationary pressures and a weakening labor market.
Silver (XAG/USD) is falling sharply to nearly $28.70 in European trading on Thursday after hitting a fresh weekly high of $29.16. The white metal is losing ground as the US dollar (USD) rebounds strongly and the Caixin Manufacturing PMI unexpectedly fell in July.
The U.S. Dollar Index (DXY), which tracks the U.S. currency against six major currencies, jumped to nearly 104.35 after rebounding from a one-week low of 103.86. The U.S. dollar’s edged rebound has made silver pricey for investors.
Besides, the unexpected decline in the Caxin Manufacturing PMI to 49.8 from the expectation of 51.5 and the earlier release of 51.8 affected the silver price. Silver as a metal has applications in various industries such as renewable energy and electric vehicles etc. Moreover, the slowdown in the Chinese manufacturing sector has raised concerns about the demand for silver.
However, powerful speculation that the Federal Reserve (Fed) will begin cutting interest rates in September will keep the downward trend low. The Fed left interest rates unchanged in a range of 5.25%-5.50% on Wednesday, in line with expectations, and its acknowledgement of cooling price pressures and weakening labor market strength pointed to expectations for rate cuts sooner rather than later.
Looking ahead, investors will focus on the ISM Manufacturing PMI report and the Non-Farm Payrolls (NFP) report for July, which will be released at 14:00 GMT and on Friday, respectively.
Technical analysis of silver
Silver is trading around the horizontal resistance set on June 13 at $28.66 on the four-hour time frame. The asset is rising above the 50-period exponential moving average (EMA) near $28.70, suggesting that the short-term trend is bullish.
The 14-period Relative Strength Index (RSI) is rising above 60.00. If the RSI remains above 60.00, the momentum is changing to bullish.
