Silver (XAG/USD) prices took a sharp nosedive on Friday, hitting $30.30 as the US Dollar (USD) maintained its strength in anticipation of the upcoming US S&P Global Purchasing Managers’ Index (PMI) data. The DXY, which gauges the Greenback’s performance against a basket of currencies, climbed to a six-week high, fueled by disappointing global PMI figures.

Market Drivers: PMI Data and Fed Rate Cut Expectations

• US PMI Data: The market is closely watching the release of the US PMI data for June, with expectations of a slowdown in both manufacturing and services activity. A weaker-than-expected report could put pressure on the USD and potentially benefit silver.
• Fed Rate Cut Expectations: Despite the Fed’s projected one rate cut for this year, markets are increasingly pricing in two rate cuts, fueled by recent softer-than-expected US inflation and retail sales data. This divergence in expectations could create volatility in silver prices.
• Global PMI Disappointments: The weaker-than-expected global PMI figures have contributed to a risk-off sentiment, supporting the safe-haven appeal of the US Dollar.
• Fed Officials’ Comments: While acknowledging the recent cooling of inflation, Fed officials like Neel Kashkari remain cautious about the pace of disinflation and the potential impact of high wage growth on future price pressures.

Technical Analysis: Silver Bounces Back, But Outlook Remains Uncertain

Silver price has rebounded after finding support near the lower boundary of a Rising Channel pattern on the daily chart. The metal is currently trading above its 20-day Exponential Moving Average (EMA), suggesting a potential short-term bullish reversal. However, the 14-period Relative Strength Index (RSI) remains in the neutral range, indicating that investors are still uncertain about the direction of the trend.

Key Takeaways:

• Silver prices are under pressure due to the strong US Dollar and disappointing global PMI data.
• Market expectations of Fed rate cuts are increasing, which could potentially support silver prices if confirmed by upcoming data.
• The technical outlook for silver is mixed, with a potential bullish reversal if the metal can hold above its 20-day EMA.