Silver Price Forecast: XAG/USD consolidates below $31 with Fed policy in focus

• Silver price trades sideways below $31.00 with Fed policy taking center stage.
• Market speculation for the Fed to start reducing interest rates aggressively remains firm.
• US Retail Sales surprisingly rose at a meager growth of 0.1% in August.

Silver price (XAG/USD) stays in tight range below the crucial resistance of $31.00 in Tuesday's North American session. The white metal consolidates as investors have sidelined, focusing on the Federal Reserve's (Fed) monetary policy decision, which will be announced on Wednesday.

The Fed is widely anticipated to start reducing interest rates. This would be the first interest rate cut decision by the Fed in more than four years. Investors will keenly focus on the likely Fed rate cut size. According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 bps to 4.75%-5.00% in September has increased sharply to 67% from 34% a week ago.

Market speculation for the Fed pivoting to policy normalization aggressively has increased lately after the release of the softer-than-expected United States (US) annual headline Producer Price Index (PPI) data for August, published last week.

Meanwhile, the US Dollar (USD) bounced back sharply after the release of the United States (US) Retail Sales data for August. The Retail Sales data, a key measure of consumer spending, surprisingly rose but at a meager growth of 0.1%. Economists estimated the consumer spending measure to have contracted by 0.2%.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, rebounds strongly to near 101.00 after declining to near the year-to-date low around 100.50.

Silver technical analysis

Silver price is at a make or a break near $31.00 ahead of the Fed's monetary policy decision. The white metal could a fresh upside if it manages to break above September 16 high of $31.10. The near-term outlook of the Silver price strengthens as the asset holds above the 20-day Exponential Moving Average (EMA), which trades around $29.30.

The 14-day Relative Strength Index (RSI) rises above 60.00. A fresh round of bullish momentum could occur if the oscillator sustains about this level.

Silver daily chart