XAG/USD fails to break above 21DMA but is still buoyant in the $22 area on the weakening dollar

• Silver has pulled back into the $22.00 area from a previous failed test of the 21DMA at $22.20.
• XAG/USD is still up over 1% on the day and up more than 7.5% from recent lows in the mid-$20.00s.
• Dollar weakness is driving the ongoing recovery, although there could be a rebound this week given the Fed’s expected dovish stance.

Spot Silver (XAG/USD) has retreated from previous session highs in the $22.20 an ounce range after failing a test of the 21-day moving average, but continues to trade for gains of around 1.2% from it Day (above 25 cents) amid continued US Dollar weakness earlier in the week. For now, XAG/USD holds steady at the $22.00 level and the uptrend that has been at play for the past ten days has seen the precious metal fall more than 7.5% from the multi-month lows in the mid-20.00s $ mark has risen, remains intact.

The main reason behind this recent rebound was the US Dollar Index (DXY)’s sharp pullback from the multi-decade highs it recorded above 105.00 earlier in the month. Since May 13th, the DXY has fallen more than 2.5% from those highs to the 102.00 low, despite Fed policymakers sounding extremely dovish last week as they intended to press ahead with rate hikes further to avoid the 102.00 low to tame rampant inflation, even in the face of a flagging economy/stock markets.

Not surprisingly, given the Fed’s role as the main driver of bullish moves in the dollar over the past few months, analysts are wondering how much longer the dollar’s decline has to continue. Surely dip buyers will come back at some point, they ask. If there is a rebound in the dollar this week, it would be bad for XAG/USD. Its failure to break above its 21DMA may prove crucial (a failure at a major moving average is often viewed as a bearish sign by technicians).

This week’s economic events arguably pose two-sided risks for XAG/USD. On the one hand, there will be plenty of talk from the Fed and the release of May’s meeting minutes, and the tone is expected to be as hawkish as ever. On the other hand, Tuesday’s US (and global) flash May PMIs, as well as Thursday’s second estimate of US first-quarter GDP growth, could prompt fresh concerns about US (and global) growth, which suggests silver as a safe haven support, especially if expected to dampen prospects for long-term Fed tightening.