Silver Price Forecast: Why is XAG/USD extending its correction ahead of US NFP data?

• Silver extends its decline towards $51.40 as markets await US NFP data.
• A sharp advance in the US Dollar comes as attention shifts to US NFP.
• Last week, the Fed’s Logan described the labour market as broadly balanced, with a slight bias towards tightness.

Selling pressure on Silver (XAG/USD) persists during Friday’s European session, with prices retreating further from the weekly peak of $53.45 towards $51.40. A recovering US Dollar is weighing on the white metal as investors adopt a cautious stance before October’s United States (US) Nonfarm Payrolls (NFP) release, due at 13:30 GMT.

At the time of writing, a 0.36% gain has taken the US Dollar Index (DXY) to around 101.92. The index measures the Greenback against a basket of six major currencies.

From a technical perspective, Dollar strength makes Silver less attractive to investors on a risk-reward basis.

What do forecasts indicate for US NFP and other key labour market figures?

Estimates put hiring by US employers at 65K new workers, up from September’s 29K, while the Unemployment Rate is expected to remain unchanged at 4.2%.

Wage growth, as measured by Average Hourly Earnings, is forecast to moderate to 2.9% year-on-year (YoY), compared with 3% in September. The monthly increase in this measure is projected at 0.3%, following the previous reading of 0.1%.

Could US NFP alter expectations for the Fed’s monetary policy?

Expectations for Federal Reserve (Fed) interest rates are unlikely to shift significantly following the US NFP release. Comments from officials after the late-October monetary policy decision have suggested that the central bank will stay on a tightening path, given upside risks to inflation.

Calling for “at least two more quarter-point rate hikes” last week, Dallas Fed Bank President Lorie Logan described it as “unacceptable” that inflation was not moving back towards the 2% target. Turning to employment conditions, Logan said, “Labor market is balanced, perhaps tightening a bit.”

Silver Technical Analysis: Where Are the Key Levels?

A bearish near-term bias persists on the weekly chart, where XAG/USD is trading at $51.45. Prices remain below the 9-week Exponential Moving Average (EMA) of $56.85 and considerably beneath the 61.8% Fibonacci retracement at $59.35. At 36.47, the Relative Strength Index (14) sits just above oversold territory. This suggests a slight easing in downward momentum, although sellers remain in charge following the extended fall from the cycle highs.

For any upward move, the first resistance lies around $56.85 at the 9-week EMA, with the 61.8% retracement at $59.35 forming the next hurdle. A more pronounced recovery would encounter further resistance at the 50% retracement near $71.24 and the 38.2% level at $83.13. Below current prices, the first significant support comes at the 78.6% Fibonacci retracement of $42.41. Beyond that lies the structural low near $20.84, representing the 100% retracement of the broader decline.

(The technical analysis of this story was written with the help of an AI tool. Know more.)