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Silver (XAG/UD) kicks off the new week on a subdued note and consolidates last week's retracement slide from or over a one-month high. The white metal remains close to a two-week low touched Friday and trades around the $30.55 region, or the 100-day Simple Moving Average (SMA), during the Asian session.

From a technical perspective, acceptance below the 100-day SMA will be seen as a fresh trigger for bearish traders against the backdrop of last week's failure near the $32.35 horizontal resistance. Given that oscillators on the daily chart have just started gaining negative traction, the XAG/USD might then turn vulnerable to weaken further below the $30.00 psychological mark and test November lows, around the $29.70-$29.65 region. 

Some follow-through selling should pave the way for an extension of the downward trajectory towards the $29.10-$29.00 support zone en route to the $28.40-$28.35 region before the XAG/USD eventually drops to the $28.00 round figure. 

On the flip side, any meaningful recovery attempt now seems to confront stiff resistance and remain capped near the $31.00 mark. A sustained strength beyond, however, could trigger a short-covering rally and lift the XAG/USD towards the $31.75 horizontal barrier. The momentum could extend further towards the $32.00 round figure en route to the monthly swing high, around the $32.35 horizontal zone touched last week.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Source: FXSTREET

The Japanese Yen (JPY) continues losing ground against its American counterpart on Monday and drops to a three-week low during the Asian session. Despite the better-than-expected release of Core Machinery Orders and flash Manufacturing PMI from Japan, expectations that the Bank of Japan (BoJ) will not raise interest rates later this week continue to undermine the JPY. Furthermore, bets for a less dovish Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields, which turn out to be another factor undermining the lower-yielding JPY.

That said, persistent geopolitical risks stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East, along with concerns about US President-elect Donald Trump's tariff plans, could offer support to the safe-haven JPY. Traders might also refrain from placing aggressive directional bets ahead of this week's key central bank event risks. The Fed is scheduled to announce its decision at the end of a two-day meeting on Wednesday, which will be followed by the crucial BoJ meeting on Thursday. Investors will look for cues about the interest rate outlook in the US and Japan, which, in turn,  will determine the near-term trajectory for the USD/JPY pair. 

Japanese Yen selling bias remains unabated amid BoJ rate hike skepticism

Government data released earlier this Monday showed that Japan's core machinery orders rose 2.1% in October and registered a strong growth of 5.6% on a year-on-year basis.

The au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) improved to 49.5 in December, though remained in contraction territory for the seventh straight month. 

Meanwhile, the gauge for the services sector rose to 51.4 in December from 50.5, while the composite PMI stood at 50.8 during the reported month, up from 50.1 in November.

This comes after the Bank of Japan's Tankan survey showed on Friday that business confidence at Japan's large manufacturers improved during the three months to December. 

Moreover, expectations that consumer prices in Japan will remain above the BoJ's 2% target, a moderately expanding economy and a rise in wages give the BoJ reason to hike rates.

Investors, however, remain sceptical regarding the BoJ's intention to tighten its monetary policy further, which continues to exert downward pressure on the Japanese Yen on Monday. 

The yield on the benchmark 10-year US government bond rose to a three-week high on Friday amid rising bets that the Federal Reserve will adopt a cautious stance on cutting rates. 

According to the CME Group's FedWatch Tool, traders are pricing in over a 93% chance that the US central bank will lower borrowing costs again, by 25 basis points on Wednesday. 

However, signs that the progress in lowering inflation toward the US central bank's 2% target has stalled raised the possibility of a slower pace of interest rate reductions next year. 

Monday's US economic docket features the release of the flash Manufacturing and Services PMIs, along with the Empire State Manufacturing Index, later during the US session.

That said, the market focus remains glued to the crucial FOMC and the BoJ meetings this week, which will help in determining the near-term trajectory for the USD/JPY pair. 

USD/JPY move above 61.8% Fibo. level sets the stage for additional gains

From a technical perspective, a sustained move and acceptance above the 61.8% Fibonacci retracement level of the November-December fall from a multi-month peak could be seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart have just started gaining positive traction and suggest that the path of least resistance for the USD/JPY pair remains to the upside. Hence, some follow-through strength towards the next relevant hurdle, around the 154.55 region, en route to the 155.00 psychological mark, looks like a distinct possibility. 

On the flip side, the Asian session low, around the 153.35-153.30 area, now seems to act as an immediate strong support ahead of the 153.00 mark. A convincing break below the latter might expose the very important 200-day Simple Moving Average (SMA) pivotal support near the 152.10-152.00 region. A convincing break below the latter might shift the bias in favor of bearish traders and drag the USD/JPY pair towards the 151.00 round figure en route to the 150.00 psychological mark.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

Source: FXSTREET

After three months of deficits, October brought a surprising current account surplus of €1064 million, significantly above the consensus of -€300mn and up from a deficit of -€1434mn in September. According to our estimates, on a 12-month basis, the current account surplus slightly decreased to 0.3% of GDP from 0.4% of GDP in September. However, October was the sixth consecutive month with a trade deficit (-€740 million, close to -€690 million in September), with exports, expressed in euro, increasing by 1.5% year-on-year (after 0.5% the previous month) and import growth accelerating to 6.6% YoY from 5.1% the previous month.

The improvement in the current account balance was driven by the income balance, which was €2 billion better than the previous month, and an improvement in the services balance (by €0.5bn compared to September). The strong increase in primary income was partly due to an increase in direct payments to farmers under the common agricultural policy (Information from the National Bank of Poland indicates an increase in these payments of about €0.4bn compared to the same period last year). Finally, the secondary income deficit of €0.4 billion was slightly better than the previous month.

As for trade turnover, its changes reflect economic trends in the country and the external environment of Poland. Domestic demand is growing much more dynamically than foreign demand, which translates into an increase in the merchandise trade balance. In particular, due to an economy fluctuating between stagnation and recession, the share of Germany in Polish exports is decreasing (according to GUS data, to 27% in cumulative terms from the beginning of the year compared to a share of 28% in the same period of 2023). Import expenditures are driven by domestic demand, particularly consumer demand, including for car purchases, and likely related to defence spending. We estimate that on a 12-month basis, the trade balance in October deteriorated to -0.6% of GDP from -0.4% after September.

Yesterday’s forecasts from European Central Bank economists for the euro area, to which almost 60% of Polish exports go, do not bode well for a quick improvement in Poland’s external environment. The ECB lowered its forecast for euro area economic growth in 2025 to 1.1% from the 1.3% forecast in September. This still seems like an optimistic forecast in the face of risks arising from the tariffs announced by President-elect Donald Trump and the erosion of the competitiveness of the European economy amid rising pressure from China, as indicated by Mario Draghi’s report. The Bundesbank lowered its forecasts for the German economy and pointed to risks related to potential tariffs on exports to the USA.

According to the NBP press release, which refers to trade turnover expressed in zloty, a decline in exports was recorded in five out of six categories of goods (the exception being agricultural products). The biggest impact was the decline in the sale of transport equipment and parts, including a decrease in the export of electric car batteries. Additionally, there was a significant drop in the export of investment goods. As for imports, an increase was recorded in three categories of goods, the strongest in the import of consumer goods, especially household appliances and clothing, as well as in the import of agricultural products and transport equipment. In the latter category, we expect strong increases in the last months of the year due to the entry into force of more stringent emission standards from the new year, as suggested by vehicle registration data. Import bills for energy raw materials were significantly lower, according to our estimates, by about 20% YoY.

The surprising surplus in the current account, although largely due to seasonal factors, is positive for the zloty. A slight surplus in the current account balance is still maintained on a 12-month basis, and the trade deficit in the same terms remains small. The outlook for foreign trade in 2025-26 suggests a shift from a surplus to a deficit in the current account balance, although relatively low – of around 1% of GDP. The zloty is positively influenced by the growing interest rate differential between Poland and the euro area, as the ECB continues its rate-cutting cycle, and there is still no agreement in the Polish MPC on when to start discussing monetary easing. The prospect of increasing inflows of EU funds from the bloc's cohesion policy and further transfers from the Recovery and Resilience Facility (the next one still in December) is also supportive of the currency.

Poland’s current account balance, % of GDP

Source: ING estimates based on NBP and CSO data.

Source: ING

US and Asia: Inflation and Rate Expectations Steer Markets

Recent U.S. inflation data has confirmed a soft economic landing, bolstering investor confidence. Markets have almost fully priced in a 25-basis-point rate cut by the Federal Reserve in its upcoming meeting. This has reinforced positive sentiment across Asian markets, where most equity indices traded higher overnight.

Europe: ECB Caught Between Cyclical and Structural Challenges

Australia: A Tight Labor Market Propels the AUD

Global Currencies: JPY and CHF in Focus

Sources: Bloomberg