XAGUSD breaks below $20.00 on spectacular US NFP

  • Silver hits daily low of $19.55 in knee-jerk reaction to US jobs report.
  • The US economy has added 528,000 jobs so US bond yields have risen sharply, a headwind for precious metals.
  • Silver Price Prediction (XAGUSD): Failure to break above $20.40 will leave silver exposed to sellers.

Silver prices plummeted after US labor data dashed expectations as traders scaled back bets that a Fed pivot was a done deal while showering cold water on recession fears. The greenback, along with the US dollar index, is up almost 0.80% to 106.579, while the US 10-year bond yield is up 15 basis points to 2.834%. Consequently, XAGUSD is trading at $19.91, losing 1.19%.

US and European stocks flipped and posted losses after the US jobs report. US Nonfarm Payrolls rose 528k in July, beating expectations of just 250k. Additionally, the previous month’s data has been revised up to 398k while the unemployment rate is trending down to 3.5%. Financial analysts gossiped, putting the Fed on the table for a 75 basis point rate hike for the September meeting, bolstered by a 0.5% month-on-month rise in average hourly wages, while rising 5.2% on a yearly basis.

Nonetheless, the inversion of the US 2s-10s yield curve is a theme in the financial markets, which deepens further to -0.370% as the US 2-year bond yield yields 3.211%.

Meanwhile, Cleveland’s Fed Chair Loretta Mester spoke Thursday and remained hawkish. She said the rate path outlined by the June dot plots is “about right,” although after a great jobs report, it should be taken with a pinch of salt. She added that 75 basis points for September is “not unreasonable”.

Elsewhere, geopolitical risks remain on investors’ minds. Tensions between the US and China, stemming from US House Speaker Pelosi’s trip to Taiwan, left some scars and consequences as China staged aggressive military exercises in Taiwan and announced sanctions against Nancy Pelosi and her family.

Something to see

Next week the US economic calendar will include the inflation data, namely consumer and manufacturing indices, initial jobless claims and the University of Michigan consumer sentiment for August.

Silver Price Analysis (XAGUSD): Technical Outlook

The XAGUSD daily chart shows that the pair is still facing solid resistance around the $20.00-$20.40 area that buyers are unable to crack. Traders should note that the 50-day EMA around $20.35 is where sellers were inclined to go, but news driving higher US bond yields would likely keep buyers at bay. Therefore, the next XAGUSD support to test will be $19.50, followed by the 20-day EMA at $19.23.

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