Silver Price Forecast: Weak NFP pushes XAG/USD to the top of its weekly range
- Silver jumps over 3% as disappointing US NFP data pressures the Greenback.
- September Fed rate hike odds fall following softer-than-expected NFP data.
- Technically, XAG/USD faces immediate resistance at $61.50, with the broader trend remaining tilted to the downside.
Silver (XAG/USD) climbs to the top of its weekly trading range on Thursday as the US Dollar (USD) slides to a two-week low after US Nonfarm Payrolls (NFP) data surprised to the downside. At the time of writing, XAG/USD trades around $61.15, up nearly 3.50% on the day.
Data released by the US Bureau of Labor Statistics (BLS) showed the US economy added just 57K jobs in June, well below market expectations of 110K. Meanwhile, May's payrolls were revised down to 129K from the previously reported 172K.
Traders quickly scaled back expectations for a Federal Reserve (Fed) rate hike at its September policy meeting, with the probability of a rate increase falling to 51% from 63% before the data release, according to the CME FedWatch Tool.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.74, retreating from an intraday high of 101.43.
However, the US Dollar's downside may remain limited as the weak employment report did little to change the Fed's hawkish stance. With inflation still running well above the central bank's 2% target, markets continue to expect the Fed could raise interest rates later this year, which could limit a stronger recovery in XAG/USD.
Technical Analysis:
On the daily chart, XAG/USD retains a bearish near-term bias as it holds below the 200-day Simple Moving Average (SMA) at $69 and the 100-day SMA at $75.
The Relative Strength Index (RSI) around 39 keeps momentum in mildly negative territory. The Moving Average Convergence Divergence (MACD) indicator remains slightly below zero with a shallow negative reading, hinting at weak downside pressure rather than a decisive bearish acceleration.
On the topside, immediate resistance is located at $61.50, with the 200-day SMA at $69.88 and the 100-day SMA at $75.08 reinforcing a broader ceiling for any recovery attempts.
On the downside, initial support emerges at the horizontal level of $55.50, where a decisive break could trigger further losses.
(The technical analysis of this story was written with the help of an AI tool.)
Nonfarm Payrolls FAQs
What are Nonfarm Payrolls?
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
How does Nonfarm Payrolls affect the US Dollar?
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
How does Nonfarm Payrolls affect Gold?
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.