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XAG/USD bounces back but remains broadly fragile amid prolong US blockade fears
- Silver price jumps to near $73.60; however, its broader outlook remains bearish.
- US President Trump said the maritime blockade could last until Labor Day.
- Investors await the US NFP data for May.
Silver price (XAG/USD) trades 1.2% higher to near $73.60 during the Asian trading session on Thursday. The white metal rebounds after a sharp sell-off on Wednesday even as fears of a prolonged United States (US) blockade on Iranian sea ports have raised concerns over its outlook, a scenario that will be in action if the US and Iran do not reach to a permanent resolution.
On Wednesday, US President Donald Trump said in an interview with The New York Post’s “Pod Force One” program that the maritime US blockade could last until Labor Day, while expressing confidence that the scenario is unlikely.
As the Labor Day will be held of September 7, the US blockade on Iran for that long, which means no permanent peace deal between the nations and energy flows remaining restricted through the Strait of Hormuz energy flows remaining restricted through the Strait of Hormuz will be unfavorable for precious metals and currencies from economies highly dependent on oil imports.
The Silver price has been underperforming since the onset of the Middle East war as higher oil prices have prompted inflationary pressures globally and have forced traders to price in hawkish Federal Reserve (Fed) bets, a sharp turnaround from two interest rate cuts anticipated before the war started.
Theoretically, higher interest rates by the Fed bode poorly for non-yielding assets, such as Silver
On the US front, better-than-projected US ADP Employment Change data for May, released on Wednesday, has set a positive tone for the Nonfarm Payrolls (NFP) data for May, which is scheduled for Friday. The US ADP Employment data showed that 122K new jobs were created in the private sector, which were higher than 117K estimates and the prior reading of 105K.
Silver technical analysis
XAG/USD trades higher at around $73.35 at the time. However, the near-term tone of the Silver price remains bearish as it holds below the 20-day Exponential Moving Average (EMA), which is at $76.02. The downside bias is also reinforced by a subdued Relative Strength Index (RSI) around 43, which stays below the neutral 50 line and suggests lingering selling pressure rather than an imminent bullish reversal.
On the topside, the 20-day EMA at $76.02 is the immediate resistance that bulls would need to reclaim to ease the current bearish pressure and open the door for a more sustained recovery towards the May 25 high at $78.83. Looking down, the asset could slide towards the April 7 low of $68.28 if it decisively breaks below the May 28 low of $71.79.
