XAG/USD crashes from $24.00 to $23.30 amid risky market
- The white metal is sharply down 2% on rising market sentiment.
- Tensions in Eastern Europe eased as Russia withdrew “some” troops as negotiations continued.
- XAG/USD Technical Outlook: Neutral biased but the path of least resistance is to the downside.
Silver (XAG/USD) is following in gold’s footsteps during the North American session, plunging off a 10-month-old downside resistance trendline towards the 100-day moving average (DMA), which sits at $23.20. At the time of writing, XAG/USD is trading at $23.38.
Geopolitical tensions between Russia, Ukraine and NATO are easing
On Tuesday, tensions between Russia and Ukraine appeared to ease after German Chancellor Olaf Scholz met with Russian President Vladimir Putin. Putin told reporters that talks with Scholz were factual.
The meeting came after the US press announced last Friday that, according to US officials, Russia’s invasion of Ukraine was “imminent.” At the same time, the Kremlin denied these allegations. In fact, earlier messages coming over the lines said that “some” Russian troops were returning home.
European and US stocks took this as a positive development in the region as all indices are trading in the green. Meanwhile, the US 10-year T-note yield is up four basis points to 2.035%, weighing on silver’s unyielding status.
Geopolitical matters aside, factors such as the US Federal Reserve’s tightening are keeping the unrelenting metal under selling pressure. On Monday, St. Louis President James Bullard reiterated his view that the Federal Reserve needs to hike 100 basis points before the July meeting. He also stressed that balance sheet shrinking could start in the second quarter and wants talks to start.
As of Tuesday, the FEDWATCH tool has a 100 percent chance of a 25 basis point rate hike, while there is a 57.9 percent chance of a 50 basis point rate hike. The Federal Reserve’s next meeting would be in March, but after the release of the US Consumer Price Index (CPI) in February, which could provide clues as to the possible outcome of unification.
Prices paid by manufacturers in the US are 0.6% yoy above estimates
Meanwhile, the Labor Department reported the Producer Price Index (PPI) for January, which was in line with the previous month and rose 9.7% yoy, higher than the estimated 9.1%. The so-called core PPI rose to 8.3% year-on-year, two-tenths lower than in December but higher than the 7.9% expected.
XAG/USD Price Prediction: Technical Outlook
XAG/USD fell around $1.00 during the overnight session on fundamental news, but a ten-month-old downtrend line in the $23.65-$70 range also exacerbated the downside, which stalled near the $23.00 level.
However, XAG/USD is neutrally biased. However, the path of least resistance is down and its first support would be the 100-DMA at $23.24. Violating the latter would reveal the confluence of the number and the 50-DMA at $23.00. Once this area gives way for USD buyers, the next challenge would be the daily low of February 3rd at $22.00.