Silver price remains under pressure from the probable rebounding of the US dollar. This headwind is founded on bets that the Fed may hike interest rates higher for longer. Granted, the asset has found some support from the better-than-expected Chinese factory activity data.
What’s driving the market?
Silver price found support in the better-than-expected Chinese factory activity data released on Wednesday. According to the nation’s National Bureau of Statistics, the official manufacturing PMI rose further into the expansion territory at 52.6. Indeed, this is the highest figure since April 2012 when it was at 53.5. Furthermore, the released number was higher than the prior month’s 50.1 and analysts’ expectations of 50.5.
China is the leading consumer of industrial metals. As such, positive data regarding its manufacturing sector and the overall optimism regarding its recovery from the COVID-19 pandemic will likely continue to support silver price.
Even so, the rebounding of the US dollar remains a key headwind in the short term. Over a span of one month, the dollar index has risen by 3.45%. While China’s factory activity data yielded a decline in the greenback on Wednesday, it has held steady above $104.00 for over a week now.
Silver price outlook
Silver price was on a rebound for the second session in a row after dropping to a four-month low on Tuesday. About a month ago, the asset rallied to a level last seen in late April 2022. However, it has since dropped by close to 15%.
As at the time of writing, silver price was up by 0.46% at 20.98. A look at its daily chart shows that the metal is still trading below the 25 and 50-day exponential moving averages. Besides, about two weeks ago, the short term 25-day EMA crossed the 50-day EMA to the downside; forming the bearish death cross pattern.
It is also at the periphery of the oversold territory with an RSI of 33. Based on these technical indicators, the recent gains may be more of a corrective rebound rather than the start of a trend reversal.
As such, I remain cautious of silver price movements in the short term. The bulls will likely lack enough momentum to break the resistance level at 21.95, which is along the 25-day EMA.
In the ensuing sessions, the range between 21.50 and 20.75 will be worth watching. On the lower side, the easing of its rebound may have silver price find support at 20.50. the probable rallying of the US dollar may give the bears an opportunity to break the support at 20.00 to a fresh 4-month low of 19.40.