Silver Price Analysis: XAG/USD keeps bounce off near-term support below $28.00, FOMC eyed

• Silver consolidates losses from eight-day low, picks up bids of late.
• Sluggish markets trigger corrective pullback amid a lack of major catalysts.
• Fed Chair Powell pressured to accept reflation fears, dot-plot also eyed.

Silver portrays a corrective pullback from a one-week low around $27.70, up 0.12% intraday, amid the initial Asian session trading on Wednesday. In doing so, the white metal snaps a three-day downtrend as markets brace for the US Federal Open Market Committee (FOMC) meeting.

A contrasting play of the US Retail Sales and Producer Price Index for May offered the latest contribution to the market’s indecision over the Fed’s next moves amid reflation fears. While Retail Sales dropped 1.3% versus -0.8% expected, PPI rose more than 6.3% forecast to 6.6% YoY.

The Fed policymakers have been terming the escalation in the price pressure as temporary, mainly due to the covid-led supply crunch, but the latest US economics keep suggesting otherwise, making today’s case of FOMC interesting.

Ahead of the meeting, Westpac said, “First up, after the meeting, the Committee's quarterly forecasts will be provided, guiding on their central expectations for the coming three years. Second, Chair Powell’s press conference will give a good guide on the degree of confidence the Committee has in their central projection for both inflation and the labor market -- the FOMC's two core concerns. Third, for these two aspects of the economy, an assessment of the risks will be provided. This will help guide on how great an impact key risks are likely to have on the outlook for policy, should they eventuate.”

Read: Fed Interest Rate Decision Preview: Chair Powell will determine market response

It’s worth noting that the recently rising tensions between the Western friends led by the US and China join the fears of the Delta variant of the coronavirus (COVID-19) to weigh on the silver prices.

Amid these plays, the US 10-year Treasury yields dropped for the first time in three days whereas the Wall Street benchmarks also closed mildly offered by the end of Tuesday’s North American Trading session.

Looking forward, silver sellers may take clues from China’s Retail Sales and Industrial Production for May, due to its industrial usage, but major attention will be given to today’s Fed release.

Technical analysis

A daily closing below an upward sloping trend line from April 29, around $27.45, becomes necessary for the silver bears to keep reins. Otherwise, the $28.00 and monthly resistance line near $28.30 will regain the market’s attention.