Silver Price Crumbles Amid Hawkish Fed Repricing and Strengthening US Dollar

The value of Silver has declined due to its negative correlation with the US Dollar. The USD Index, which measures the value of the Greenback against a basket of six majors, is trading at 101.37 after hitting its highest level in more than one year. This hawkish Fed repricing has fuelled a nearly 2% USD rally in September, which explains precious metals' decline.

According to John Velis, analyst at BNY Markets, 'instead of long-term inflation driving yields higher, it was ironically perceptions of central bank credibility, markets are expecting the Fed (and other central banks) to raise rates in response to rising inflation.'

XAG/USD's impulsive reversal printed on Tuesday broke the neckline of a bearish Head & Shoulders (H&S) pattern at the $62.20 area. Momentum indicators in the daily chart reinforce the bearish view, as the Relative Strength Index (14) slides below 40, and the Moving Average Convergence Divergence (MACD) indicator steadies within negative territory.

Bears are pushing against support around the September 9 low of $60.87. Further down, the next target might be the September 8 low at the $59.30 area, and the 78.6% Fibonacci retracement of the July - August rally at $58.15. The H&S's measured target lies below the year-to-date low at $54.71.