Silver prices awaiting FOMC outcome while consolidating at critical resistance

• XAG/USD bulls chipping away at daily resistance within a firming backdrop for commodities.
• Monthly, weekly time frames conflicting as markets adopt the greenback and await the FOMC.

Silver has been chipping away at the upside as the bulls look to prior daily resistance and the US dollar makes small progress in prospects of breaching the 92 level measured by the DXY index. 

DXY is currently trading at 91.80 having climbed from a low of 91.54 to a high of 91.96 while silver is up by some 1.17% on the day trading between $25.8040 and $26.3050. 

Precious metals were higher tat the start of the week, boosted by prospects of a faster economic recovery and a commodities supercycle as well as firmer bond prices. Rising bond yields earlier this month pushed the precious metals complex to the lowest since June.

The gold to silver ratio was lower on Monday, also portraying a more favourable market for the silver bulls in a rising commodity complex gauged by the Thomson Reuters CRB Index, consolidating at monthly highs. 

Markets adopting the greenback

Looking ahead, it will be a busy week with the Federal Open Market Committee.

As per the latest round of positioning data, the US dollar has been regarded in a better tone of late.

Net USD short positions shrunk for a third consecutive week and have been one of the best performing G10 currencies in recent weeks.

There has been a shift in expectations regarding Fed interest rate policy, so the focus is very much on how FOMC members will respond to the enacted fiscal stimulus, the successful vaccine rollout and any changes to the dot plot’s interest rate forecasts.

Silver technical analysis

Monthly chart

The price is meeting support and expectations are for a continuation higher from the monthly perspective. 

Weekly chart

The weekly time frame shows that the price is meeting the resistance of a 38.2% Fibonacci retracement from which a downside continuation into the demand zone would be expected. 

Daily chart

However, on a break of the weekly resistance, the daily chart will be well on its way to test higher resistance and forming a W-formation.