Silver Price Analysis: XAG/USD approaches $24.00 as Fed to skip an interest rate hike

Silver price (XAG/USD) has climbed above the immediate resistance of $23.86 and is now approaching $24.00 barricade in the European session. The reason behind the strength in the white metal is the expectations of a neutral interest rate policy announcement by the Federal Reserve (Fed).

S&P500 futures have added gains recently in the European session as hopes of further interest rate hikes by the Fed have faltered. The risk appetite of the market participants is extremely solid, which has improved the appeal for risk-perceived assets.

The US Dollar Index (DXY) has printed a fresh day’s low at 103.21. More downside is in the pipeline as a neutral policy stance by Fed chair Jerome Powell will trim policy divergence of the Fed with other central banks. Also, the yields offered on 10-year US Treasury bonds have dropped sharply below 3.81%.

No doubt, a neutral interest rate policy is widely anticipated, however, the street believes that the dot plot would remain hawkish. There are clear signs that United States inflation is softening and labor market conditions are releasing heat. However, current Employment conditions are broadly resilient, and inflationary pressures are double the desired rate. Fed policymakers would be needed severe ‘blood and sweat’ in easing inflation comfortably around 2%.

Silver technical analysis

Silver price has witnessed a responsive buying move after a failed breakdown below the Rising Channel chart pattern on a two-hour scale. In a Rising Channel pattern, each pullback is considered a buying opportunity by the market participants.

The white metal has managed to rebound above the 200-period Exponential Moving Average (EMA) at $23.83, which indicates that the long-term bullish trend is intact.

Adding to that, the Relative Strength Index (RSI) (14) has rebounded into the 40.00-60.00 range, which indicates a bullish reversal.

Silver two-hour chart