Silver Price Forecast: XAG/USD eyes breakout above $28 as Fed rate-cut bets in September max out

• Silver price gathers strength to break above $28.00 on firm Fed rate-cut prospects.
• US inflation grew moderately in July.
• Investors await the US monthly Retail Sales data for July.

Silver price (XAG/USD) jumps to near crucial resistance of $28.00 in Thursday’s European session. The white metal aims to deliver more upside as investors expect that the Federal Reserve (Fed) looks set to start reducing interest rates from the September meeting.

According to the CME FedWatch tool, 30-day Federal Finds Futures pricing data shows that the Fed is certain to cut its key borrowing rates in September but traders are split over the size of interest-rate cuts.

Firm speculation for Fed rate cuts has been further boosted by the moderate increase in the United States (US) Consumer Price Index (CPI) data in July, which confirmed that progress in the disinflation process towards bank’s target of 2% continues. Annual headline and core CPI, which excludes volatile food and energy prices, decelerated to 2.9% and 3.2%, respectively.

Growing expectations for Fed rate cuts have weighed on the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, exhibits a subdued performance slightly above a more than seven-month low of 102.16. 10-year US Treasury yields jump to near 8.45% but are still close to weekly lows.

Meanwhile, investors await the US monthly Retail Sales data for July, which will be published at 12:30 GMT. The economic data is expected to show that Retail Sales rose by 0.3% after remaining flat in June.

Silver technical analysis

Silver price rebounds after a negative divergence formation on a four-hour timeframe, which shapes when the momentum oscillator refuses to make lower lows, while the asset continues. The 14-period Relative Strength Index (RSI) rebounded from 24.00 without hitting downside below previous low of 20.00.

However, the above-mentioned formation would trigger if the white metal breaks above the immediate swing high plotted from the August 2 high of $29.23.

The asset climbs above the 50-period Exponential Moving Average (EMA) near $27.70, suggesting that the near-term trend is upbeat.

The 14-period RSI has bounced back to near 60.00 and a decisive break above the same will trigger the upside momentum.

Silver four-hour chart