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Precious Metal Prices Retreat from Annual Highs

4/6/2023 1:01 PM

The XAG/USD pair shows a weak downward momentum, retreating from the record highs of April 2022, updated the day before. The instrument is testing 24.80, waiting for new drivers to appear on the market.

Investors are in no hurry to open new positions in anticipation of tomorrow's publication of the March report on the US labor market, which may significantly affect the future monetary policy of the US Federal Reserve. Current forecasts for the May meeting of the regulator are ambiguous and almost equally imply both keeping the interest rate unchanged and its further increase by 25 basis points. One way or another, the pressure on the American currency is increasing this week with the publication of uncertain macroeconomic statistics. The day before, a weak report was released from Automatic Data Processing (ADP) on Nonfarm Payrolls, which reflected a drop in the indicator from 261.0 thousand to 145.0 thousand, with a forecast of 200.0 thousand. The Services PMI from the Institute of Supply Management (ISM) was also disappointing, falling in March from 55.1 points to 51.2 points, which turned out to be noticeably worse than expected at 54.5 points.

The instrument, in turn, is supported by the declining yield of US bonds observed since the end of March: 10-year Treasuries are trading at a rate of 3.2940% after opening at 3.3480% at the last session.

According to the world's largest financial derivatives market CME Group Inc., as early as March 29, the futures position of investors in silver consisted of 46.291 thousand contracts, and the option position of 7.725 thousand; however, according to the report for April 5, the futures position increased to 76.577 thousand contracts, and the option up to 14.931 thousand. Thus, the inflow of investment capital into the asset almost doubled over the week, which is a significant event for a rather conservative silver and may signal a continuation of the uptrend in the XAG/USD pair.

Bollinger Bands on the daily chart show a steady increase. The price range is expanding but it fails to conform to the surge of "bullish" sentiments at the moment. MACD indicator is growing preserving a stable buy signal (located above the signal line). Stochastic, reaching its highs, is trying to reverse downwards, indicating risks of overbought silver in the ultra-short term.

Resistance levels: 25.00, 25.35, 25.58, 26.00. | Support levels: 24.67, 24.42, 24.00, 23.60.

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