Silver (XAG/USD) keeps rallying on Thursday, with precious metals buoyed by lower Treasury yields amid a pullback in oil prices that has eased bets on US Federal Reserve (Fed) rate hikes. XAG/USD has hit fresh three-week highs above the $80.00 level, and is heading to the April 20 highs in the $80.50-$80.70 area at the time of writing.
Markets are welcoming reports of progress in the US-Iran peace process, while recent rumours of talks to reopen the Strait of Hormuz are pushing Oil prices down. The combination of a weaker US Dollar amid the risk-on sentiment and lower Crude prices, which eases pressure on the US Federal Reserve (Fed) to hike interest rates, is boosting precious metals’ recovery, and has propelled Silver about 10% higher over the last two days.
Technical Analysis: Silver’s rally starts to look overstretched
XAG/USD shows an impulsive reversal from weekly lows. The higher low at the $72.25 area and the bullish engulfing candle printed in the daily chart on Wednesday are clear signs that a trend shift is in progress.
Momentum indicators, however, are pointing to overstretched conditions, which might lead to some consolidation or even to a bearish correction. The 4-hour Relative Strength Index (RSI) approaches 80, a heavily overbought level, and the Moving Average Convergence Divergence (MACD) histogram is positive and rising, adding to the case for a strong but potentially overextended upside pressure.
Initial resistance emerges at the mentioned area ahead of $80.70, which closes the path towards April’s peak, right above $83.00. On the downside, the previous range top, at the $76.70 area, might provide some support ahead of the weekly low, at the $72.15 area.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Source: https://www.fxstreet.com/news/silver-price-forecasts-xag-usd-rallies-beyond-8000-amid-risk-appetite-lower-us-yields-202605071024
