XAG/USD rallies above $22.10, shaking off flood of US data pre-NFP

  • Silver prices hold on to gains after a flood of US jobs data.
  • XAG/USD was last up around 1.3% in the $22.10 area, eyeing a test of last week’s highs.
  • The focus is now on Friday’s official labor market report.

A flurry of US jobs data in recent trading gave mixed signals, with the ADP estimate of May jobs change missing consensus and adding some downside risks to market expectations of a 325k gain in May nonfarm payrolls on Friday, while the second estimate of unit labor costs for Q1 saw an upward revision to 12.6% QoQ from an already spicy 11.6%. Weekly jobless claims data was also resilient, but the net impact was that the US dollar fell to fresh session lows in recent trade as US yields continue to trade lower on the day.

This has created a favorable backdrop for silver (XAG/USD) spot prices, which last traded around 30 cents or about 1.3% on the day in the $22.10 an ounce range. That means a recovery of more than 3.0% from Wednesday’s lows under $21.50, with bulls now eyeing a test of last week’s highs of just under $22.50.

However, any bullish breakout in silver will have to wait until Friday’s official US jobs report. If job gains fail to impress, suggesting a weaker than expected economy and less pressure on the Fed to tighten monetary policy so aggressively, it could buoy bulls. A break above the resistance in the $22.50 area would open the door for an uptrend towards $23.00 and resistance in the mid $23.00.

Note that traders will also be watching Friday’s US wage growth numbers closely and if that surprises to the upside it would worry the Fed (and markets) as everyone has been hoping inflation may have peaked by now. In that case, expect a dip below the 21-day moving average (at $21.76) that XAG/USD has been bouncing back and forth to both sides for the past few weeks, as well as a test of earlier weekly lows in the mid- $21.00s.

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