(XAG/USD) Daily Outlook Update Silver (XAG/USD) is consolidating around the $66.00 level on Tuesday after recording small gains for the week after rebounding from the middle of the $64.00 level range last week. The precious metal is benefiting from a weaker US dollar as markets reopen in the US after a long weekend, with traders watching the CPI report due Friday to gauge how the coming week’s Fed meeting went. According to analysts at HSBC, “US economic data weakness, worries about inflation, questions about Fed policy credibility and political risk all drag down the dollar, adding more weight to the debate over debasement.” But they also say that “Fed Chairmen Warsh’s Jackson Hole speech was critical as it helped alleviate one key aspect of this story by restoring confidence in the Fed’s determination to beat inflation.” It has been “helpful in lowering the risk of policy credibility being an enduring burden on the Dollar and debasement story, at least temporarily,” say HSBC’s economists. However, the bank is concerned about “other structural risks, particularly US fiscal sustainability risks, which may resurface and pose pressures on the Dollar once again.” XAG/USD is trading at $66.02 halfway through the month’s range, in the range of about $63.00-$71.00, slightly below the crucial 200-day simple moving average of $73.00. Daily momentum oscillators are neutral, with the RSI (14) at 52 and MACD below zero but not significantly. Initial resistance appears at the August 25 and 27 lows at $67.40, above the highs of June 12 and August 28 at $71.12-$71.56, and the above-noted 200-day SMA of $72.95. The downside is the possibility of bears taking control before a major support area below $63.00. A break below this level will confirm the H&S pattern, adding more pressure on the way to the August 6 low at $60.87.
