Silver prices remained subdued on Tuesday, pressured by a firmer U.S. dollar and ongoing uncertainty over the Federal Reserve’s upcoming policy announcement. XAG/USD traded close to $57.43 in early U.S. hours, following a reported 2% drop to $57.23 per ounce earlier in the session.
Technical signals point to cautious outlook
Recent chart action indicates that short-term momentum in silver is weak. Key support is seen near the $55 level, an area where buyers have recently appeared. Analysts expect long-term demand to draw strength from a projected supply deficit, yet traders remain cautious ahead of the Fed’s policy decision and major U.S. data releases.
The four-hour chart places silver below its 50-period exponential moving average, which stands at $58.30. This average now acts as the first resistance after repeated failed attempts to keep prices above $59 and $60.
Relative strength index readings remain near 42, still under the neutral threshold of 50. This suggests a lack of bullish momentum but does not indicate conditions are severely oversold. Sideways trading could persist until a more decisive trend develops.
Support is seen near the session low of $56.71. If that level breaks, attention is likely to shift back to $55, an area that previously attracted buying interest. A recovery above $58.30 may unlock further upside, with targets set at $59.50 and the key $60 psychological level.
On a daily time frame, silver’s outlook is even more reserved. Prices remain well below the 50-day exponential moving average, which is positioned around $63.69. The daily RSI, also at 42, signals that sellers continue to control the market.
A sustained close above $60 could improve near-term structure for silver. A stronger reversal would likely depend on a move above $63.70, turning this region into support. Failing that, rallies could continue to encounter selling pressure. Should the price close below $55 on a daily basis, the risk of a slide into the low-$50s would increase.
Dollar strength and gold outperformance weigh on silver
The U.S. Dollar Index traded near 101.51, hovering above its 50-period EMA at 101.20, and the RSI remained near 62, reflecting upward momentum. The dollar’s advance to a one-month high was linked to rising expectations of a Federal Reserve rate hike, which often makes dollar-denominated assets like silver pricier for international buyers.
Meanwhile, the gold-silver ratio reached about 70.47, well above its 50-day EMA of 66.61. This rising spread indicates that gold continues to outperform silver. If the ratio moves above 72, it could signal further relative weakness in silver, while a decline below 68 would be considered an encouraging sign for silver’s prospects.
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The Federal Reserve is expected to deliver its policy decision on Wednesday, July 29, at 2 p.m. EDT, followed by a press conference. At this stage, markets are pricing in a 62% likelihood that rates will remain unchanged, with a 38% probability assigned to a quarter-point hike.
A rate hike or hawkish messaging from the Fed may drive the dollar higher and pressure silver prices toward $55. Conversely, a rate hold accompanied by softer language could help XAG/USD reclaim the $58.30 level, possibly challenging $60.
This week’s focus also includes the upcoming releases of second-quarter GDP and June PCE inflation data, due Thursday morning. These data points are likely to influence market sentiment for both currencies and precious metals.
For now, the outlook for silver remains cautious as prices trade below $58.30. Retaining support at $55 preserves a potential base for buyers, while a close above $60 would signal that bullish momentum is returning.
