Silver prices show moderate gains, correcting after the June 27 "bearish" rally that led to July 2020 fresh record lows. At the beginning of the current trading week, XAG/USD also showed negative dynamics.
The fall in quotations of the instrument is associated with a noticeable strengthening of the US currency, which again receives support from expectations of further tightening of monetary policy. The day before, the US Fed published its May minutes, which reflected the readiness of the regulator to raise the rate in July by 50 or 75 basis points. At the same time, the department pointed to growing inflationary risks, as well as a gradual deterioration in the situation on the labor market. In this regard, investors are showing increased attention to the publication of the June data from the ADP on Nonfarm Payrolls.
Tomorrow, the final report on the labor market for June will be released in the US. Current projections suggest a fall in new Nonfarm Payrolls from 390K to 270K, and the Unemployment Rate is likely to remain flat at 3.6%. Additional support for silver is provided by possible restrictions on the export of Russian gold to the EU, as well as the United States, Great Britain and Japan as part of the next package of sanctions against the Russian economy.
The pressure on the instrument, in turn, is exerted by a decrease in production activity in many regions of the world, which may provoke a reduction in demand for silver as a raw material. The market today connects certain hopes for stabilizing the balance of supply and demand mainly with China, but the picture is overshadowed by new cases of COVID-19 infection recorded in Shanghai.
Support and resistance
Bollinger Bands in D1 chart demonstrate active decrease. The price range is widening, having struggled to keep up with the development of the "bearish" trend in the last few weeks. MACD is trying to reverse upwards keeping a previous sell signal (located below the signal line). Stochastic, having approached its lows, reversed into a horizontal plane, indicating risks of an oversold instrument in the ultra-short term.
Resistance levels: 19.50, 20.00, 20.58, 20.86.
Support levels: 19.00, 18.41, 18.00, 17.60.