XAG/USD pulls back from YTD highs but holds at $26.00

  • Appetite for silver waned as investors sought higher yields on bullish market sentiment.
  • US Treasury yields are rising, a headwind for the white metal.
  • XAG/USD Technical Outlook: Still bullish despite the correction into the $25.60 area.

Silver (XAG/USD) pulls back from its 8-month highs near $27.00 as market participants’ risk appetite has increased, spurred in part by Ukraine’s openness to discussing Russia’s call for neutrality. At the time of writing, XAG/USD is trading at $26.13 during the North American session.

European and US stock markets are licking their wounds and rising sharply as dip buyers usher in a four-day sell-off as hostilities between Russia and Ukraine appear to be easing some, reducing appetite for safe-haven assets, a reason for the fall of silver.

The greenback is trading weaker in the US, with the US Dollar Index plunging 0.90% and near the 98.00 level, while US Treasury yields rose with the 10-year T-Note falling gaining five basis points to 1.922%, posing headwinds for the US dollar the white metal.

Update Russia – Ukraine

The Russia-Ukraine conflict seems to be finding a way out. On Tuesday, Ukrainian President Volodymyr Zelenskyy said Ukraine was not pushing for NATO membership. He is open to talks with Russia as long as there are security guarantees. On Wednesday, Ukrainian Presidential Deputy Chief of Staff Zhovkva said that “Ukraine is ready for a diplomatic solution,” adding that Ukraine will not trade “a single inch” of its territory.

That being said, a missing US economic calendar and the US Federal Reserve blackout would discourage silver traders from pure market play. Nonetheless, on Thursday the US list would list the consumer price index (CPI) for February alongside the core CPI, just five days ahead of the Fed’s March meeting.

Cash futures have priced in a 25 basis point rate hike in March while the probability of a 50 basis point hike is less than 2%. For December 2022, market participants are expecting the Federal Funds Rate (FFR) to come in at 1.50%, meaning investors are expecting at least six quarter-basis point hikes for the rest of the year.

XAG/USD Price Prediction: Technical Outlook

XAG/USD is trending higher despite the decline. Indeed, Wednesday’s decline saw a quick bounce near $25.62, the daily high of Feb. 24, resistance-now-support, as XAG buyers pushed the price above $26.00 and the keep the rally intact.

If XAG/USD holds above $26.00, initial resistance would be at $26.45, the high of July 16, 2021. A break of the latter and $26.77 would be the next price to call ensuing from the YTD high at $26.94.

Otherwise, XAG/USD could correct towards the 50% Fibonacci level, also coinciding with the November 2021 highs around $25.35-40, which could be a better price for dip buyers as they resume the uptrend take up.

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