- Silver prices hit a daily low of $19.55 in a knee-jerk reaction to the US jobs report.
- The US economy created 528,000 new jobs, so US bond yields jumped, a headwind for precious metals.
- Silver Price Prediction (XAGUSD): If you don’t break above $20.40, silver will remain exposed to sellers.
Silver prices plunge after U.S. labor data crushed expectations, as traders cut bets that a Fed pivot was a done deal while pouring oil cold water on recession fears. The greenback is higher, with the US dollar index up almost 0.80% at 106.579, while the yield on US 10-year bonds soared 15 basis points to 2.834%. Therefore, XAGUSD is trading at $19.91, losing 1.19%.
US and European equities shifted gears, posting losses following the US jobs report. U.S. nonfarm payrolls for July rose 528,000, beating expectations of just 250,000. Additionally, data for the previous month was revised up to 398,000, while the unemployment rate rose. dropped to 3.5%. Financial analysts chatter, put a 75 basis point Fed rate hike on the table for the September meeting, bolstered by average hourly earnings up 0.5% MoM while on a yearly basis it has increased by 5.2%.
Still, the US 2s-10s yield curve inversion is a theme around the financial markets desks, deepening further to -0.370%, as the US 2-year bond yield yields 3.211%.
In the meantime, Cleveland Fed President Loretta Mester spoke out on Thursday and remained hawkish. She said the rate trajectory depicted by the June dot plots was “about right,” though it should be taken with a pinch of salt after a strong jobs report. She added that a 75 basis points for September is “not unreasonable.”
Elsewhere, geopolitical risks continue to haunt the minds of investors. US-China tensions, courtesy of US House Speaker Pelosi’s trip to Taiwan, have left scars and consequences, with China conducting aggressive military exercises around Taiwan and announcing sanctions against Nancy Pelosi and her family.
What to watch
Next week, the US Economic Calendar will feature inflation data including consumer and producer indexes, initial claims for unemployment insurance and consumer sentiment from the University of Michigan for the month of august.
Silver Price Analysis (XAGUSD): Technical Outlook
The XAGUSD daily chart illustrates that the pair is still facing strong resistance around the $20.00-$20.40 area, with buyers unable to break it. Traders should note that the 50-day EMA around $20.35 is where the sellers have been leaning towards, but news propelling 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.