XAG/USD clears daily losses, limited by rising US yields

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• XAG/USD dropped to a daily low of $22.35 but then settled at around $22.60.
• Risk aversion dominates the markets, strengthening the USD.
• Eyes on Wednesday’s FOMC minutes from July’s meeting.

At the start of the week, risk-off flows predominate the markets and limit the Silver’s upside. With no relevant data released, higher US Treasury yields and a stronger USD dictate the pace of the metal.

The US bond yields are edging higher after the release of inflation from July from the US data last week. The 10-year bond yields 4.19%, with 1.29 % gains on the day. The 2-year yield stands at 4.96% with 1.25 % gains, and the 5-year yield is at 4.38% with 1.29 % gains. In line with that, the USD measured by the DXY index rose to its highest level since early July, above 103.00 and limiting the precious metal’s gains.

Regarding the next Federal Reserve decisions, rising US yields hint that tightening expectations have risen. According to World Interest Rate Possibilities (WIRP) tool, the markets
that a skip in September is likely while the odds of a 25 basis point (bps) hike in November rose nearly 40%. That being said, the Federal Open Market Committee’s (FOMC) minutes from July’s meeting will provide markets with a clearer outlook regarding the official’s stance, which could generate volatility in the US bond markets and hence in the XAU/USD price dynamics.

XAG/USD Levels to watch

Analysing the daily chart, XAG/USD presents a bearish outlook for the short term, with both Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remaining in negative territory. Additionally, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), suggesting that the bears are firmly in control of the bigger picture, leaving the buyers with tasks to accomplish.

Support levels: $22.50, $22.30, $22.00. 

Resistance levels:  $23.27 (200-day SMA), $23.50, $24.00.

XAG/USD Daily chart