Silver Price Forecast: XAG/USD extends upside to near $33.20 on US credit downgrade

• Silver price jumps to near $33.20 as the US Dollar underperforms on the US Sovereign Credit downgrade.
• Moody's downgraded the US credit rating by one notch to Aa1.
• Investors await the Russia-Ukraine ceasefire talks in Vatican City.

Silver price (XAG/USD) hits a fresh weekly high to near $33.20 during North American trading hours on Wednesday. The white metal strengthens as the US Dollar (USD) extends its downside on the United States (US) credit rating erosion in the wake of large debt levels and escalated fiscal imbalances.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, slumps to near 99.50, the lowest level seen in two weeks. Technically, a soft US Dollar makes the Silver price a value bet for investors. Additionally, concerns over US credit erosion improve the safe-haven demand of non-yielding assets, such as Silver.

On Friday, Moody's downgraded the US Sovereign Credit rating by one notch to Aa1 from Aaa amid concerns over ballooning debt levels to near $36 trillion. The credit rating firm also warned of debt levels widening further, with US President Donald Trump aiming to pass a new tax-cut bill to fulfil his economic agenda.

However, Republican lawmakers didn't back the new tax bill in a closed-door meeting on Capitol Hill on Tuesday due to disagreement over higher deductions in state and local tax payments, according to a Republican Representative Mike Lawler, Reuters reported.

Meanwhile, investors keep a close eye on the Russia-Ukraine truce talks in the Vatican City. On Monday, US President Trump confirmed immediate ceasefire talks between Moscow and Kyiv through a post on Truth. Social, but didn't mention any specific timeframe. Trump expressed confidence that talks would be majorly about ending the war and not a temporary truce. Russia and Ukraine will immediately start negotiations toward a Ceasefire and, more importantly, an END to the War," Trump said. Signs of progress in the Russia-Ukraine truce talks towards ending the war will be unfavorable for safe-haven assets, such as Silver.

Silver technical analysis

Silver price delivers a breakout of the Descending Triangle formation on a daily timeframe, which results in a strong upside move. The near-term trend of the white metal is bullish as it holds the 20-period Exponential Moving Average (EMA), which trades around $32.65.

The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a sideways trend. Should a fresh bullish momentum emerge if the RSI breaks above 60.00.

Looking up, the March 28 high of $34.60 will act as key resistance for the metal. On the downside, the April 11 low of $30.90 will be the key support zone.

Silver daily chart