XAG / USD struggles at $ 22.50 on rising US T-bond yields
- Market sentiment is bullish, which is triggering a move from safe assets to riskier assets.
- Rising US T-bond yields boost the greenback while weakening unprofitable silver.
- Positive divergence and a bullish pattern on the daily chart triggered the move towards $ 22.60.
Silver (XAG / USD) is sliding for the first of four days, trading at $ 22.62, down 0.25% for the day at the time of writing. Investor risk appetite is in risk-on mode, represented by price movements in US stock indices, with the S & P500, Dow Jones and Nasdaq posting gains of 1.48%, 1.29% and 1.90%, respectively.
Higher US T-bond yields weigh on silver
The yield on 10-year US Treasuries is up four basis points (bps) and is at 1.522%, which weighs on the white metal price as higher bond yields mean higher real yields and hurt the outlook for unprofitable assets like gold and silver. Meanwhile, the US Dollar Index (DXY), which tracks the dollar’s performance against its peers, is up 0.13% and currently stands at 93.93.
XAG / USD Price Prediction: Technical Outlook
On a daily chart, XAG / USD is trading below the daily moving averages (DMA’s), which suggests that silver is in a downtrend. However, the rebound at USD 21.00 due to a positive divergence between price action and momentum indicators such as the Relative Strength Index (RSI) resulted in an upward movement of around USD 22.60 that was previously tested unsuccessfully six times. Additionally, the presence of a bullish candlestick pattern put further upside pressure on the move.
A daily close above $ 22.60 could open the door to further gains. The first resistance would be $ 23.00. A break above the latter would reveal important levels of support available. The 50-day moving average (DMA) is $ 23.69, followed by the September 10th high of $ 24.29.
On the flip side, a failure at $ 22.60 could pave the way for a decline towards the 2021 annual lows of $ 21.00, but there will be some hurdles on the way down. The first demand zone would be $ 22.00. A break below this level would reveal significant areas of demand at $ 21.42 followed by $ 21.00.
The Relative Strength Index (RSI) is at 44, slightly on the downside, suggesting the white metal is still under downward pressure and could trigger another downtrend.