Silver price dives after US labor data crushed expectations, as traders scaled back their bets that a Fed pivot was a done deal while pouring cold water to recession fears. The greenback is rising, with the US Dollar Index, up almost 0.80% at 106.579, while the US 10-year bond yield soars 15 bps, up at 2.834%. Consequently, XAGUSD is trading at $19.91, losing 1.19%.
US and European equities shifted gears, recording losses following the US employment report. US Nonfarm Payrolls for July increased by 528K, topping expectations of just 250K. Furthermore, the prior month’s data was revised upwards to 398K, while the Unemployment Rate tick lower to 3.5%. Financial analysts chatter, put a Fed’s 75 bps rate hike on the table for the September meeting, reinforced by Average Hourly Earnings rising 0.5% MoM while on an annual basis, rose by 5.2%.
Still, the US 2s-10s yield curve inversion is a theme around financial markets desks, further deepening to -0.370%, as the US 2-year bond rate is yielding 3.211%.
In the meantime, Cleveland’s Fed President Loretta Mester spoke on Thursday and stayed hawkish. She said the rate path outlined by June dot plots is “about right,” though it should be taken with a pinch of salt after a great jobs report. She added that a 75 bps for September is “not unreasonable.”
Elsewhere, geopolitical risks keep lingering in investors’ heads. Tensions between the US and China, courtesy of US House Speaker Pelosi’s trip to Taiwan, left some scars and consequences, with China conducting aggressive military drills around Taiwan and announcing sanctions against Nancy Pelosi and her family.
Next week, the US economic calendar will feature the Inflation data, namely consumer and producer indices, Initial Jobless Claims, and the University of Michigan’s Consumer Sentiment for August.
The XAGUSD daily chart illustrates the pair is still facing solid resistance around the $20.00-$20.40 area, with buyers unable to crack it. Traders should note that the 50-day EMA, around $20.35, is where sellers had been leaning to, but news propelling higher US bond yields would likely keep buyers at bay. Therefore, the XAGUSD next support to test will be $19.50, followed by the 20-day EMA at $19.23.
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