Silver (XAG/USD) declined on Tuesday, trading around $47.70 per ounce, down 1.10% on the day. This drop came after the metal attempted to extend its recent rally beyond the $49.50 level but faced increasing selling pressure.
The rise in the US Dollar (USD) is a key factor behind Silver’s decline. The dollar gained strength amid growing expectations of a more restrictive monetary policy from the Federal Reserve (Fed). Several Fed officials, including Chair Jerome Powell, have recently adopted a firmer tone. Powell notably mentioned that another rate cut in December “is not a given,” which has influenced market sentiment.
Currently, markets price in roughly a 65% chance of an interest rate reduction at the December Fed meeting, according to the CME FedWatch tool. This cautious Fed stance is supporting the US Dollar and limiting gains for non-yielding assets like Silver.
Meanwhile, the US economy faces hurdles due to the ongoing budget stalemate in Washington. The partial government shutdown has entered its sixth week, potentially becoming the longest in US history if it continues. The shutdown may delay the release of key economic indicators, such as the Nonfarm Payrolls (NFP) report, adding to macroeconomic uncertainty.
In addition to domestic concerns, investors are closely monitoring persistent geopolitical and trade tensions. These issues keep demand for safe-haven assets alive, providing some defensive support to Silver and helping to limit the extent of its recent correction. The metal’s recent gains had been fueled by hopes that the Fed might resume monetary easing if economic risks increase.
**Silver Technical Analysis: Faces Resistance Near $49.40 Amid Potential Double-Top Setup**
On the 4-hour chart, Silver is encountering resistance in the $49.40 region, near the previous peak recorded on October 23 at $49.46. This has formed a potential double-top pattern.
A rejection from this resistance zone could trigger a deeper bearish correction, potentially exposing the October 28 low at $45.56. A break below this level, which serves as the neckline of the double-top formation, would open the door to a more pronounced decline with a projected target around $41.80.
On the upside, a break above the $49.40 resistance would bring the 100-period Simple Moving Average (SMA) on the 4-hour chart into focus. The 100-period SMA currently rests at $49.80. Should Silver manage to surpass this level, further gains could see it testing the recent all-time high at $54.86.
The 100-period SMA is mildly downward-sloping, and the Relative Strength Index (RSI) has dropped below the 50 level, both of which underscore mounting bearish momentum in the short term.
Overall, Silver faces headwinds from a stronger US Dollar and cautious Fed outlook but continues to benefit from safe-haven demand amid economic and geopolitical uncertainties. Traders should monitor key technical levels closely as the metal navigates this critical resistance zone.
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