Silver climbed to the top of its weekly range as a weaker US Nonfarm Payrolls report pulled the US Dollar to a two-week low. XAG/USD was trading near $61.15, up almost 3.50% on the session, after the Bureau of Labor Statistics reported 57K jobs added in June versus expectations of 110K. May payrolls were revised down to 129K from 172K, while the Dollar index stood around 100.74 after easing from an intraday high of 101.43.
Rate expectations adjusted quickly, with the CME FedWatch Tool showing September hike odds at 51% versus 63% before the release. Price action remained bounded by technical levels: silver stayed below the 200-day SMA at $69 and the 100-day SMA at $75, with the RSI around 39 and the MACD slightly below zero. Resistance was cited at $61.50, with the 200-day SMA at $69.88 and the 100-day SMA at $75.08, while support was marked at $55.50; the Fed’s 2% inflation target continues to frame policy expectations.
Market Reaction To Weak Jobs Data
We’ve seen silver rally sharply after the weak June jobs report, which showed only 57,000 jobs were added against an expected 110,000. This has caused a knee-jerk reaction against the US Dollar, providing a temporary boost for precious metals. This presents an opportunity, but we should be cautious about chasing this move higher.
The market has quickly reduced the odds of a September rate hike from the Federal Reserve, which is the main reason for the dollar’s current weakness. However, we must remember that the Fed’s primary fight is against inflation, not a slightly softening labor market. The most recent Consumer Price Index data showed core inflation is still running at 3.4%, well above the central bank’s 2% goal.
This single piece of employment data is unlikely to alter the Fed’s overall hawkish policy direction for the year. Looking back at the last major tightening cycle in 2017-2018, similar weak data points caused short-term metal rallies that ultimately faded as the Fed’s rate path remained firm. We expect the US Dollar will find its footing again, limiting how high silver can go from here.
Technical Outlook And Trading Strategies
From a technical standpoint, this rally has pushed silver right into immediate resistance at the $61.50 level. The broader trend remains bearish, with the price still well below key moving averages like the 200-day SMA near $70. This makes the current price level an attractive area to consider selling volatility or establishing cautious short positions.
For derivative traders, this spike in volatility makes selling out-of-the-money call options or establishing bear call spreads an interesting strategy. This allows us to collect premium while betting that silver will fail to break through significant overhead resistance in the coming weeks. We are essentially fading this data-driven rally within the context of a larger downtrend.
If our view is correct and the rally does falter, we will be watching for a move back towards the support level at $55.50. A break below this level would confirm that the longer-term downtrend is reasserting itself. We will remain nimble, as the dollar’s reaction over the next few trading sessions will be critical.
