Silver Price Forecast: XAG/USD nosedives to $70 as Fed is unlikely to cut interest rates this year
LONDON (March 19) Silver price (XAG/USD) plummets almost 6.5% to near $70 during the European trading session on Thursday. The white metal faces intense selling pressure as traders raise bets favoring an extended pause by the Federal Reserve (Fed).
According to the CME FedWatch tool, the collective odds of the Fed leaving the Federal Fund Rate unchanged in the current range of 3.50%-3.75% and hiking it from these levels in the December meeting are 57.5%.
The Fed holding interest rates steady for an extended period bodes poorly for non-yielding assets, such as Silver.
Speculation that the Fed will hold interest rates steady for longer intensified after the Fed’s monetary policy outcome on Wednesday, in which officials indicated that monetary policy adjustments are inappropriate unless inflation starts progressing towards the central bank’s 2% target.
“If inflation progress stalls, rate cuts will not follow,” Fed Chair Jerome Powell said in the press conference after the central bank decided to leave interest rates unchanged for the second time in a row, as expected.
Meanwhile, conflicts in the Middle East are not providing any support to the Silver price. Theoretically, demand for safe-haven assets, such as Silver, increases in a heightened geopolitical environment.
Earlier in the day, United States (US) President Donald Trump warned that he will blow up the South Pars gasfield if it attacks Qatar again, and says Israel will not be attacking the Iranian energy site again, AL Jazeera reported.
Silver technical analysis
XAG/USD extends its losing streak for the third trading day on Thursday and plunges to near $70.40 during European trading hours. The near-term bias turns extremely bearish as price extends its decline well below the 20-day Exponential Moving Average (EMA), which now tracks near $81.90 and caps the upside.
The 14-day Relative Strength Index (RSI) slides below 40, for the first time in 11 months, to 34.00, which points to a strong negative momentum going forward.
The next major support zone appears near the February low at around $64.00, followed by the round level of $60.00. On the upside, initial resistance emerges at the $75.00 area, with a break above exposing the 20-day EMA near $81.90 as a stronger barrier to recovery.
FXStreet
