Silver (XAG/USD) has been stuck in a tight range for three days, staying below the mid-$36.00s during Tuesday’s Asian trading session. It’s near its highest level since February 2012, hinting that it may rise further.
This range-bound movement is seen as a positive sign after a strong rally from April’s low. Daily chart indicators suggest that XAG/USD could climb higher, but it may hit resistance between $36.85 and $36.90.
If it breaks above this resistance, the price could extend past $37.00, nearing the February 2012 peak. However, if it drops below $36.00, support might be found around $35.45, with potential declines down to below $35.00.
Historically, silver has been a store of value and a medium of exchange. Investors buy it to diversify their portfolios, tap into its intrinsic value, or protect against inflation, acquiring it physically or through trading options like ETFs.
Silver prices are affected by geopolitical events, interest rates, and the US Dollar. Industrial demand from electronics and solar energy also plays a role, while economic conditions in the US, China, and India influence prices further. Silver often follows gold’s trends, and the Gold/Silver ratio provides insights into their relative valuations.
Currently, silver (XAG/USD) is consolidating just below multi-year highs. It has stabilized in a tight trading range for several sessions, hovering right below $36.50. This pause has occurred after a significant surge from its April low, suggesting that the market is digesting recent gains and gearing up for a potential next phase.
On daily charts, short-term indicators like the Relative Strength Index and Moving Average Convergence Divergence show a tendency for upward movement. However, the resistance between $36.85 and $36.90 remains unbroken. A clear move past this level would likely bring $37.00 into play, challenging the February 2012 high. Conversely, if prices can’t maintain support above $36.00, declines could reach the low $35.00s, particularly around $35.45, which has previously offered support.
It’s essential to recognize that silver is not just an investment; it has practical uses in solar technology, automotive electronics, and manufacturing. This dual utility makes it sensitive to macroeconomic changes and trade data from major countries like China and India. When these economies show growth or decline, silver often reacts quickly.
The US Dollar’s movements and interest rate expectations also impact silver’s performance. If yields stay low and the Dollar weakens, especially amid persistent inflation, metals that hold value tend to do well. This situation has helped silver near 12-year highs. However, if rate expectations shift due to central bank actions, current prices could become vulnerable, especially since the rally from April is quite extended.
Traders should pay attention to the Gold/Silver ratio. A recent decrease in this ratio often indicates a shift in preference towards silver, signaling stronger industrial demand or short-term speculative interest. If the ratio changes again, it could suggest that the silver price needs to align more closely with its historical relationship to gold.
To gauge market action, monitoring trading volume in these upper ranges could indicate whether current activity is accumulation before a breakout or distribution before a reversal. Caution is advised against false breakouts. If silver struggles repeatedly near $36.90 and trading volume decreases, it may signal that buying momentum is fading.
Looking ahead, the most likely direction might still be up, but only if conditions favor a breakout. A sudden change in the Dollar’s direction or unexpected economic data from Asia could impact this outlook. Investors should remain alert to risk-reward setups and limit exposure near resistance, waiting for clear price behavior—whether a solid breakout or signs of rejection.
Singapore’s non-oil domestic exports fell by 3.5% year-on-year in May, defying predictions of an 8.0% increase. This drop comes after a strong 12.4% rise in April.
Exports grew to Taiwan, Indonesia, South Korea, and Hong Kong. However, there were declines in shipments to the United States, Thailand, and Malaysia. Consequently, Singapore has lowered its GDP forecast for 2025.
The new growth prediction is now between 0% and 2%, down from the previous estimate of 1% to 3%.
These figures indicate a decline in expected trade performance, which was not in line with earlier forecasts. A 3.5% drop in non-oil domestic exports, especially after the significant increase in April, raises concerns about external demand as we head into the second half of the year.
The adjusted GDP estimate of 0% to 2% signals a reassessment of economic growth. This lower range reflects both external trade challenges and weaker domestic activity. The original forecast was overly optimistic, suggesting a growth of 1% to 3%.
While there were increases in exports to Taiwan, Indonesia, South Korea, and Hong Kong, they couldn’t counterbalance declines to major partners like the United States, Thailand, and Malaysia. The drop in exports to the U.S. is notable because it usually remains stable. The declines in exports to Thailand and Malaysia indicate a broader regional weakness, potentially due to slower production or reduced spending.
For those closely monitoring the situation, this mixed performance across regions highlights the need for short-term strategies that consider diminishing export margins, especially in electronics and precision instruments. These sectors are prone to sharper fluctuations based on slight changes in demand in Asia and North America.
The varied performance across export destinations suggests the need for a more nuanced approach. We may see a shift in trade strategies, moving away from the assumption of a uniform global recovery to focus on specific country indicators.
The unexpected export decline, along with the lowered GDP outlook, hints that economic challenges may continue over the next few quarters. This situation could influence interest rate expectations and currency hedging strategies. Additionally, the Singapore dollar might face pressure if trade conditions do not improve.
Historical patterns show that revisions in such data can lead to changes in implied volatility in SGD currency pairs, especially when market expectations shift. This will affect how we assess risk premiums in the near future, requiring any strategy adjustments to consider increased downside risks.
Markets may need to adjust their growth expectations for Asia. The recent trade growth with smaller partners does not fully offset the declines with larger ones. Short-term contracts linked to growth benchmarks should be viewed with this revised understanding—lower growth scenarios now hold more significance.
A slowdown in specific areas is already apparent, which may lead to re-pricing in certain derivatives sensitive to GDP trends. We should be cautious not to rely solely on April’s strong performance without considering May’s downturn.
In summary, the data points have shifted from a more straightforward trade outlook to a mixed collection of indicators. This will require shorter-term adjustments while long-term strategies are recalibrated.
The AUD/JPY currency pair fell back to 94.50 during the Asian session on Tuesday. This drop followed the Bank of Japan’s (BoJ) decision to keep its interest rate policy unchanged at the June meeting.
The BoJ held the short-term interest rate target between 0.40% and 0.50%, which caused a positive reaction in the yen. This marks the third straight meeting without a rate hike, after a previous increase of 25 basis points in January.
Bank Of Japan’s Role
The BoJ plans to cut its monthly bond purchases to ¥200 billion every quarter. In good news for the Australian dollar, China’s retail sales in May rose by 6.4% compared to last year, surpassing the 5.0% forecast.
Understanding the BoJ’s role helps explain the yen’s movements. Since March 2024, the bank, focused on maintaining monetary stability, has been moving away from ultra-loose policies.
The main reasons for this change are a weakened yen and rising inflation from increased energy costs. As a result, the yuan’s value has started to recover following these policy changes.
Currently, the AUD/JPY pair touched 94.50 before pulling back during early Asian trading, influenced by the BoJ’s recent decision. By keeping the short-term policy rate steady between 0.40% and 0.50%, the bank is not making any abrupt changes in its monetary approach for now. This stability, following a 25 basis point rise in January, indicates the central bank’s cautious but proactive stance.
With Kuroda’s successor delicately guiding the country away from years of negative rates and aggressive asset purchases, the yen is regaining strength. This shift is largely driven by the need to control imported inflation through a stronger exchange rate. It’s no surprise that the yen responded positively to the announcement as the bank moves closer to normalization.
Implications For Traders
The BoJ’s plan to cut bond purchases by ¥200 billion quarterly may sound small at first, but it demonstrates a commitment to gradually reduce support without disrupting long-term yields too much. For market participants, such adjustments provide more stability than surprises, aiding price discovery.
Meanwhile, there was positive news from China, a crucial trading partner for Australia. Retail spending in May rose 6.4% year-over-year, exceeding the expected 5.0%. This increase in domestic demand can positively impact commodity-linked currencies like the Australian dollar—not only in sentiment but also by sustaining export volumes and strengthening raw goods prices.
Traders should stay alert, not only to central bank policies but also to how economic updates from Asia may influence currency flows. The yen’s changing direction may continue, especially as markets adjust to a higher rate environment in Tokyo. Monitoring short-end rate differentials and forward yield spreads can be crucial.
The recent short-term movements in AUD/JPY perfectly illustrate these opposing forces—one side influenced by Australia’s key trade partner’s domestic recovery and the other supported by Japan’s measured tightening signals. While directional trends may feel unpredictable, this may create opportunities for range setups or volatility-focused strategies, provided intra-day levels are closely monitored.
Looking ahead, portfolio sensitivity to these developments may heighten. A stronger yen could shift risk sentiment broadly, while stronger readings from China may bolster regional currencies. Traders focusing on options or structured volatility trades should consider both macro developments and central bank influences in their strategies. Tools that mitigate tail risks, especially around potential surprises from Japan, could be valuable, even during quieter market weeks.
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The People’s Bank of China (PBOC) is predicted to set the USD/CNY reference rate at 7.1820. This rate will be revealed around 0115 GMT. The PBOC sets a daily midpoint for the yuan against other currencies, mainly the US dollar.
China uses a managed floating exchange rate. This allows the yuan to change within a 2% range around the central reference rate. Each morning, the PBOC determines this midpoint based on market demand, economic data, and fluctuations in international currencies. This midpoint serves as the trading reference for the day.
Yuan Fluctuation and Central Bank Intervention
The yuan can move within +/- 2% of the midpoint. The PBOC may change this range based on economic conditions. If the yuan approaches the limits of this band or becomes too volatile, the PBOC may step in to stabilize its value. This intervention can involve buying or selling the yuan.
By setting the USD/CNY reference rate at 7.1820, the central bank provides a stable daily anchor for those engaged in yuan trading. This midpoint is influenced by global exchange factors, local economic conditions, and market sentiment. It serves as a guideline rather than a strict rate but is seldom seriously challenged. Currently, the currency is allowed to move within a 2% band above and below this midpoint throughout the day.
Previous interventions show that officials are likely to tolerate gradual changes but will act to prevent sudden shifts. In the upcoming weeks, various factors, especially foreign monetary developments like those in the US, could lead to stronger dollar demand, which would put downward pressure on the yuan. Authorities are aware of this and will likely try to prevent significant changes, even in reaction to external shocks.
When the central bank sets a specific rate like 7.1820, it signals its intention to maintain strong control. It’s like securing a tent’s outer cords — allowing some movement but preventing collapse. Therefore, when considering strategies involving yuan-denominated pairs, it isn’t wise to expect large swings unless external factors might truly disrupt that rate. Traders should focus on range-bound strategies, avoiding extreme bets based on broader economic shifts, unless those shifts could prompt a reevaluation of the midpoint.
Implications for Traders and Intervention Patterns
Traders should also consider the expected patterns of intervention. Historically, the central bank is willing to take action to stabilize the currency when needed. This intervention isn’t always aggressive. Often, liquidity tools or clear signals through the official fix indicate discomfort. However, with current pressures on exports and sensitive capital flows, an undervalued yuan poses risks. Policymakers likely want to avoid a situation where a weak currency leads to increased outflows, driving further weakness.
Keeping the midpoint close to current spot levels indicates an effort to strike a balance. Policymakers aim to maintain stability without completely resisting market forces. Therefore, it’s wise to assume that significant depreciation below the current band won’t be allowed. This makes betting on additional weakness risky unless significant news emerges to change official policy. On the other hand, substantial appreciation could clash with trade competitiveness, which may also face subtle resistance.
We are closely monitoring any shifts in the daily fixing pattern or unexpected deviations, as these might precede tighter policy changes. For trades involving yuan crosses, careful attention to daily fixes and forward curves is necessary. A tightening of daily bands or larger gaps between fixes and spot prices could indicate future adjustments. Until then, the range appears well-defined.
Lastly, it’s important to note that derivative pricing aligns with this careful approach. Current implied volatilities are stable, and there is a slight bias toward hedging against yuan depreciation, although nothing extreme. Strategies should consider selling premium during quieter periods while also incorporating options to guard against sudden mispricings from policy surprises. Holding a long-term directional view without factoring in the daily anchoring mechanism could lead to misleading results.
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The US dollar is climbing against many currencies. This rise is slow and is influenced by several news events.
President Trump has called for an immediate evacuation of Tehran. However, the White House has downplayed this, saying it’s meant to encourage Iran to negotiate. Trump is also leaving the G7 summit early to head back to Washington, D.C.
Fox News reports that Trump has told the National Security Council to be ready in the Situation Room. These events might affect market stability in different ways.
What we see now are clear signals from Washington that add geopolitical risk, causing a gradual increase in the dollar as traders assess the situation. The President’s comments about Tehran and his sudden exit from the summit create a sense of rising tension, regardless of any future actions.
Despite the White House trying to soften the impact of these remarks, markets often react to tone and timing rather than intentions. This shift has led to a cautious move towards the dollar. When investors feel uncertain about global conflicts, they often prefer to invest in a stable currency, especially when actions seem sudden or aggressive.
The news that senior advisers are gathered in the Situation Room does not go unnoticed by the markets. While it doesn’t mean immediate action is likely, it suggests that some decisions might be under careful review. Traders remember that past meetings like this have often led to policy changes, which can create a directional bias.
In previous instances where similar statements were made without follow-up action, we saw temporary swings in FX volatility. But currently, the situation is still unfolding. The signals from policy staff and the President’s changing schedule are more significant right now. The worry isn’t just about potential conflict; it’s about how quickly the markets are adjusting to uncertainties.
For now, volatility risk premiums might stay high, especially with JPY and CHF trades, which often gather safe-haven interest when headlines spur defense-related purchases. Calendar spread traders may notice that implied volatility stays higher than realized unless tensions ease.
Trading desks should be cautious and not oppose these moves for the moment. While the dollar’s current strength reacts to news rather than follows a trend, a lack of clarity about future scenarios could put pressure on positioning. Delta exposure might need more careful adjustments, especially if liquidity drops in less active pairs.
As we navigate this time, we’re exercising caution and using high-frequency indicators to monitor shifts in G10 positioning. Pay attention to intraday technicals, but treat them as explorative rather than definitive. Also, keep a close eye on forward points: forward premiums show a dollar-positive shift across several Asian currencies, indicating that hedging demand is also a factor—not just spot activity.
Unless new messages help stabilize the current rhetoric, expect active and varied tactical positioning, with price-driven entries prevailing over medium-term conviction trades.
USD/CAD rose to almost 1.3580 during early trading in Asia on Tuesday. The US Dollar strengthened due to rising tensions in the Middle East, particularly between Israel and Iran, which could escalate into a larger regional conflict.
Market attention is on the US May Retail Sales data, expected later today, which may affect the USD/CAD exchange rate. The Canadian Dollar could gain from increasing crude oil prices, as Canada is a major oil exporter to the US.
Recent US inflation data suggests that the Federal Reserve might cut interest rates. Traders estimate there is about an 80% chance of a rate cut in September, followed by another in October.
Factors Affecting the Canadian Dollar
Several key factors influence the Canadian Dollar, including the Bank of Canada’s interest rate decisions, oil prices, economic performance, inflation, and trade balance. Data on GDP and employment are also important since a strong economy attracts investments and may lead to higher interest rates.
Higher oil prices benefit the Canadian Dollar because oil is Canada’s largest export. Additionally, inflation impacts the currency; rising inflation could lead to higher interest rates, attracting more capital.
The recent rise above 1.3580 in USD/CAD is mainly due to external factors, particularly turmoil in the Middle East. The conflict between Israel and Iran has increased global demand for safe-haven currencies, boosting the US Dollar. Early trading this week is heavily influenced by geopolitical risk.
The US Retail Sales data for May could provide insight into consumer spending, which is crucial for monetary policy. If the data exceeds expectations, we might see reduced support for policies aimed at easing, especially around the anticipated rate cuts in September and October. However, with recent inflation trends suggesting moderation, many in the rates market believe the Federal Reserve is likely to ease rates in the latter half of the year. This belief is already reflected in the futures market, which assigns an over 80% probability to rate cuts this autumn.
In Canada, the Loonie often rises and falls with oil prices due to the country’s resource-based economy. Recent gains in the energy market, including Brent and WTI oil benchmarks, have supported the Canadian Dollar against other G10 currencies. Additionally, domestic economic data, such as inflation and employment figures, is under scrutiny. Stronger GDP or tighter job data could push for interest rate increases or postpone cuts.
Potential Market Impact
The Bank of Canada has shown readiness to diverge from the Federal Reserve, putting it in a challenging position. If oil prices remain high and inflation doesn’t decrease as expected, Governor Macklem and his team may refrain from further interest rate cuts. With inflation previously exceeding acceptable levels, the Bank must be careful with its guidance. Meanwhile, strong retail figures from the US and hawkish statements from the FOMC could keep USD/CAD on a high trajectory.
In terms of trading strategies, monitoring energy markets is as important as observing macroeconomic trends. Unexpected decreases in US inventories or new OPEC comments may influence Canadian growth outlook, affecting interest rate expectations in Canada. With increased market volatility, traditional correlations may not hold, so it’s essential to be alert for potential divergences.
Overall, the current trend tends to favor the USD during risk-off periods due to its status as a reserve currency and its liquidity. However, there are times when oil-related trades boost the Canadian Dollar, though these gains can quickly reverse if market sentiment changes. It’s crucial to track interest rate differentials and significant news events closely, rather than relying solely on broader trends.
Relative yields, particularly the 2Y spread, may predict future movements. Traders should adjust their short-term models to be more sensitive to these changes. Attention should also be paid to central bank officials’ speeches; a stronger dovish tone could shift expectations faster than anticipated.
As summer progresses, lower liquidity during regional holidays or between major economic reports could amplify moves in this trading pair. A spike in futures-implied volatility could reveal insights into near-term hedging strategies that might not be obvious from price movements alone. Staying adaptable and responsive to data is crucial, especially with geopolitical events and price-sensitive algorithms increasingly shaping short-term trading strategies.
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Canadian Prime Minister Mark Carney has reached an agreement with US President Donald Trump to negotiate a deal on tariffs within 30 days. This is the first time a clear timeline has been set for an agreement.
Currently, the USD/CAD pair is trading up by 0.01% at 1.3571. This slight increase shows cautious optimism in the currency exchange market after the announcement.
Understanding Risk Sentiment
“Risk-on” and “risk-off” describe how investors feel about the market. “Risk-on” means investors are confident and willing to take risks by choosing riskier assets. “Risk-off” means investors prefer safer options because of uncertainty.
In a “risk-on” environment, stock markets rise, commodities typically become more valuable, and currencies from countries rich in resources strengthen. The Australian Dollar (AUD), Canadian Dollar (CAD), and New Zealand Dollar (NZD) are examples of such currencies.
On the other hand, in a “risk-off” scenario, government bonds increase in value, and commodities like Gold also gain. Currencies like the US Dollar (USD), Japanese Yen (JPY), and Swiss Franc (CHF) tend to strengthen, as they are considered safe-haven currencies.
The recent agreement signals a real effort to ease tariff tensions, with Carney and Trump establishing a clear 30-day timeline. This marks a departure from previous vague discussions. While this announcement doesn’t resolve the dispute, it creates a defined expectation for action. Traders often respond to this with initial interest in riskier assets.
The small increase in USD/CAD shows mild optimism, but it is cautious. A 0.01% rise is not significant; it’s a sign that traders are waiting to see how things unfold. Market participants are being careful, as political developments can quickly impact economic policy and sentiment.
Investors and Market Dynamics
During times like this, investor behavior follows the risk sentiment framework. When confidence increases, even briefly, investment tends to flow into equities, oil, industrial metals, and currencies that benefit from global trade. Since the CAD is closely linked to commodities, especially oil, it usually strengthens in these situations. However, this can change quickly if new data or geopolitical news emerges.
If negotiations fall through or stall after 30 days, we can expect a quick defensive reaction from investors. This often leads to a shift towards bonds and safe currencies, which are seen as more stable, even if yields are lower. While the USD doesn’t always move in sync with risk-off sentiment, it often gains support during times of currency stress.
It’s also important to keep an eye on commodity prices, especially crude oil, as they have a direct impact on the CAD. A downturn in the oil sector could weaken the currency, regardless of overall market sentiment. This is especially true in the short term when news about relations between Washington and Ottawa takes the spotlight.
As the deadline approaches, we should see an increase in volatility measures and hedging costs, particularly as we enter the third week. This delayed reaction is common; volatility tends to stay low until traders fear a political agreement might not happen.
So, what should traders do in the upcoming sessions? Monitoring implied volatility in USD/CAD options will provide insights into market expectations. A rise in volatility before data or political events may suggest someone is preparing for a significant change. Tracking the relationship between equity indexes and commodity-linked currencies is also helpful—any mismatch could indicate positioning before a shift in market sentiment.
For now, traders seem to be taking a cautious approach, hedging their positions. This is wise, given that the risk of sudden headlines or changes in tone from either side is high. Markets usually do not reward overconfidence when the outcomes of policies remain unpredictable.
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The Canadian Dollar (CAD) has gained nearly 0.17% against the US Dollar (USD). Geopolitical tensions in the Middle East, particularly between Israel and Iran, are causing market fluctuations.
There’s no major economic data from Canada expected until inflation figures are released at month-end. Still, the CAD has reached its highest levels in months against the USD, putting pressure on the American dollar.
USD/CAD Pair Movement
The USD/CAD pair has dropped below the 1.3600 level due to ongoing conflicts in the Middle East. Initial reports of possible peace talks with Iran were quickly denied, affecting market sentiment.
The CAD has strengthened in nine out of the last twelve trading sessions. The currency pair is approaching eight-month highs as the USD continues to decline.
Several factors influence the CAD, including the Bank of Canada’s interest rate decisions, oil prices, and Canada’s economic health. The US economy and overall market feeling also play important roles in the CAD’s movement.
The Bank of Canada’s main goal is to keep inflation between 1% and 3% through interest rate adjustments. Changes in oil prices can have a significant effect on CAD value since Canada is a major oil exporter. Economic data also shapes the strength of the currency.
Impacts of Oil Markets
The recent rise of the Canadian Dollar, which increased by almost 0.17% against the USD, is mostly influenced by global risk events and expectations regarding near-term policy changes. The drop below the 1.3600 mark in the USD/CAD pair shows trader uncertainty around the US Dollar amid geopolitical tensions and weakening US economic indicators.
Concerns about the Middle East, especially regarding Iran and Israel, have heightened market sensitivity. Early signs of potential diplomacy were quickly dismissed, causing abrupt shifts in market positioning. This situation has led to increased demand for currencies like CAD, which are less tied to investor fears, especially as oil prices rise.
Though Canadian economic data has been limited ahead of the inflation release at month-end, the Canadian Dollar shows strength, suggesting that investors are focusing more on overall economic trends rather than just Canadian indicators for now. The CAD has closed stronger against the USD in nine of the last twelve sessions, showing confidence that policy differences may be lessening between Canada and the US.
Bank of Canada Governor Macklem and his team are concentrating on controlling inflation within the 1-3% range. This focus will be key when interpreting any surprises in inflation figures later this month. If inflation turns out to be higher than expected, it may delay or alter forecasts for interest rate cuts, further supporting the CAD.
Oil markets are essential for predicting Canadian economic momentum. Global oil prices are influenced by supply chain issues, and any price increase supports the CAD. This relationship is particularly strong during periods of risk aversion, when currencies tied to commodities tend to perform better.
In the US, weakened market sentiment and disappointing job data are putting pressure on the Greenback. We’re seeing a stronger connection between equity volatility and reduced demand for USD, as adjusting monetary policy becomes more likely. This situation narrows the interest rate gap, which diminishes support for the USD in favor of other currencies.
In this context, we’re examining two key aspects over the next two weeks: the potential for surprises in Canadian CPI data and how commodities, especially oil, perform. Traders using specific strategies will want to carefully consider their positions leading up to the inflation report, as changes could happen quickly. With the USD on the decline, traders looking to sell volatility might experience higher sensitivity to changes in direction due to political news or unexpected domestic economic data.
While the momentum in the USD/CAD cross shows continued strength for the Canadian dollar, it’s important to not rely solely on past trends. Risk indicators, like VIX and treasury yield spreads, are becoming better signs of whether this trend will continue. We’re keeping an eye on whether any stability in volatility breaks down as we approach month-end, and how short-term option contracts may react to broader market movements.
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Silver prices are stabilizing above $36.00, which is now acting as immediate support after a breakout in June. Ongoing tensions between Israel and Iran are increasing Silver’s demand as a safe investment. Meanwhile, the performance of the US Dollar and Treasury yields are impacting the market ahead of the FOMC decision.
This month, Silver’s value has climbed over 10%, but it seems to be consolidating as it waits for new market drivers. The US Dollar has weakened due to political instability, which is helping Silver stay around $36.38, with a slight gain of 0.2% since Friday.
The Israel-Iran conflict has boosted the demand for safe assets like Silver. There are rumors that Iran may restart nuclear talks with the US, which could limit Silver’s potential to rise. However, some Iranian officials dispute these reports.
Increased speculation about a possible interest rate cut by the Federal Reserve has made Silver more appealing, balancing the uncertainty stemming from the Middle Eastern conflict. With Silver trading near $36.38 after a strong rally, traders are closely watching key resistance and support levels identified by recent trends and technical indicators.
Positioning in Silver is more cautious now that prices are hovering just above $36.00. Buyers who were eager during the June breakout are showing signs of reservation, causing the metal to move sideways as various macroeconomic factors influence its outlook. The ongoing geopolitical risks, especially regarding Iran and Israel, have heightened the allure of safer assets. Yet, reports of potential diplomatic talks between the US and Tehran have introduced some complexity to the situation. While initial reactions drove prices higher, any confirmation of easing tensions could limit further gains.
In terms of volatility, Silver rose over 10% in June, so a period of sideways movement is expected. The metal holding around $36.38 reflects this cooling momentum, despite slight gains recently. This muted activity is partly due to a weaker US Dollar, which faces pressure from domestic uncertainties and expectations around the Fed’s future interest rate decisions. Each decline in the dollar seems to give Silver more room to stabilize at this level.
The bond market has added a two-way risk element, with Treasury yields dipping slightly, supporting the view that the Fed might be done tightening. Renewed expectations for a rate cut by year-end are making non-yielding assets more attractive, particularly if the Fed is set to respond to an unstable economy. This sentiment appears to be driving interest in Silver. However, the market is sensitive to rate changes, and the upcoming Federal Open Market Committee meeting will likely influence direction.
From a technical perspective, the price range is tightening. There’s support just below at $36.00, which has held multiple times during trading. Traders are now focused on recent highs to determine if momentum can build again. The market is watching closely for reactions to US economic data releases and any updates on interest rate expectations. Short-term trading is likely to favor metal exposure unless hawkish comments from Powell or Fed officials emerge, which could push Treasury yields higher and dampen demand.
Looking ahead, we’ve noted the stabilization phase and expect quieter price movements until more policy signals are given. This may favor mean-reverting strategies or range-based trading for technical traders until signs of a breakout reappear. Market inflows will remain sensitive to headlines, meaning sharp developments in the Middle East or updates from Iran could lead to quick changes in pricing. The elevated options premium indicates that traders are anticipating uncertainty rather than a clear direction.
Right now, we are monitoring Silver’s behavior around established resistance. If it fails to convincingly reach recent highs, a re-test of lower support levels becomes more likely. Conversely, any dovish shift from the Fed or further reduction in geopolitical tensions could spark another upward move. The combination of falling yields and a weaker dollar provides some support for bulls, but positioning suggests a more cautious phase ahead. Whether this results in a broader reversal or just a temporary pause will depend on upcoming developments in Washington and Vienna.
The New Zealand Food Price Index (FPI) increased by 0.5% in May 2025, which is lower than the 0.8% rise seen in April. The FPI measures the average price changes of food items sold in the country and is reported monthly by Statistics New Zealand.
The FPI tracks a selection of food items that reflect what typical households buy. It acts as a key indicator of inflation in New Zealand because food costs are a significant part of household spending.
The May 2025 FPI report, showing a 0.5% rise, indicates a slower increase compared to April’s 0.8%. This report gives us a clear view of food price inflation trends in the country, based on regular household purchases. Since food prices significantly influence the overall Consumer Price Index (CPI), even small changes can indicate broader inflation trends.
Looking at the latest figures, it appears that inflation may be slowing down. While one month of data isn’t enough to confirm trends, the smaller increase in May compared to April could suggest a reduction in demand or easing supply issues. However, we should be cautious before jumping to conclusions. Changes in food prices, especially for categories like fruits, vegetables, dairy, and meat, often depend on weather, shipping, and harvest conditions that vary more frequently.
For those analyzing inflation-sensitive contracts, the recent change isn’t too drastic but shows a slower inflation rate from food prices. This could influence how energy prices and interest rates are perceived in the near future. A smaller impact from food inflation may shift focus to other parts of the CPI that tend to be more volatile or are affected by external factors.
Wheeler previously emphasized the importance of relying on data in this situation. Central banks must pay attention to new inflation data, especially when it concerns essentials like food. Bond markets, which often predict policy changes, are reacting with smaller adjustments after releases like this. Even though these patterns come from short-term consumer behavior, the longer-term effects on interest rates should remain on our radar.
Harrison pointed out that a slowdown in staple goods inflation might signal reduced consumer demand. This could mean that pressures on household budgets are stabilizing, leading to fewer price increases unless wages rise significantly. This situation reduces the justification for aggressive rate hikes or further changes to rate forecasts. We have noticed that when food price data comes in lower than expected, the volatility in interest rate futures tends to decrease, especially for shorter-term futures.
Traders focused on macroeconomic risk need to adapt their strategies. Even though the changes in food price inflation are modest, they have lessened immediate concerns about tightening rates. There’s reason to reevaluate future guidance based on how quickly prices are adjusting. Our focus should shift to analyzing new data rather than fixating on one issue.
Wilkins made a valid point during last week’s forum: as early-year price fluctuations subside and food prices stabilize seasonally, the impact on monetary policy responses lessens. Hence, the market might be overreacting to the recent softening. A month-on-month change under 1% doesn’t reverse trends; it merely stabilizes them. It’s best to await the next updates on fuel and housing costs before drawing any firm conclusions for upcoming rate changes.
Some are looking to the Reserve Bank’s recent minutes as a guide for understanding these updates. While we don’t expect an immediate change in rate policy based solely on this data, it does support the view that sudden policy moves may be less justified now. If we consider the macro perspective that Price and his team discussed earlier this year, mild decreases in food and other essential prices indicate underlying disinflationary pressures. If these modest trends continue, they may eventually lead to noticeable changes in the rate-implied volatility markets by the end of the year.
From our perspective, keeping an eye on upcoming CPI figures and producer input costs will help us stay grounded. Recently, we have adjusted our short-duration strategies to align with softening inputs, anticipating more breathing room across risk-weighted assets. For now, this change in the FPI gives us greater clarity on the direction of price pressures. We aim to be more observant than reactive, focusing on measurable trends rather than purely directional feelings.
Figure illustrating changes in the New Zealand Food Price Index over the past months.
Trend analysis of household food expenditure patterns in New Zealand.
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