Silver (XAG/USD) traded marginally lower at around $67.90 during the European session on Tuesday, reflecting cautious sentiment among investors ahead of the United States Consumer Price Index (CPI) data for May, scheduled for release on Wednesday [1]. The market anticipates that the headline US CPI will accelerate to 4.2% year-on-year from 3.8% in April, while the core CPI is expected to rise to 2.9% from 2.8% over the same period [1]. On a month-on-month basis, headline and core CPI are estimated to increase by 0.5% and 0.3%, respectively [1].
The upcoming inflation data is seen as pivotal for shaping expectations regarding the Federal Reserve's monetary policy outlook. Recent hawkish sentiment has intensified following stronger-than-expected Nonfarm Payrolls data for May, with the CME FedWatch tool indicating a nearly 71% probability that the Fed will implement at least one interest rate hike this year [1]. This has weighed on non-yielding assets like silver, as higher interest rates typically reduce their appeal [1].
From a technical perspective, XAG/USD remains below its 20-day Exponential Moving Average (EMA) at $73.97, reinforcing a bearish near-term bias. The Relative Strength Index (RSI) stands at 35.83, close to oversold territory, suggesting that while downside momentum persists, it may be slowing as selling pressure matures [1]. Immediate resistance is identified at the 20-day EMA ($73.97), with a daily close above this level needed to signal a potential recovery towards $80. On the downside, silver could slide towards the March 23 low at $61.61 if bearish momentum continues [1].
CONCLUSION
Silver prices are under pressure as investors await critical US inflation data, which could influence the Federal Reserve's interest rate decisions. The market's cautious stance and technical indicators point to a bearish outlook in the near term, with further downside possible if hawkish Fed expectations persist.