Silver Price Forecast: XAG/USD corrects slightly from $39 ahead of US PCE inflation data

• Silver price retreats to near $38.80 ahead of the US PCE inflation data for July.
• Fed's Waller warns of labor market risks and supports interest rate cuts in September.
• Silver price holds above the 20-day EMA, which is around $38.28.

Silver price (XAG/USD) trades 0.6% lower around $38.80 during the European trading session on Friday. The white metal corrects slightly after failing to extend its upside above $39.00, with investors awaiting the United States (US) Personal Consumption Expenditure Price Index (PCE) data for July, which will be published at 12:30 GMT.

Economists expect the US core PCE inflation, which is the Federal Reserve's (Fed) preferred inflation gauge, to have risen at a faster pace of 2.9% on year against 2.8% in June, with the monthly figure rising steadily by 0.3%.

Technically, signs of price pressures accelerating force traders to pare bets supporting interest rate cuts by the Federal Reserve (Fed). However, the impact is expected to be limited as Fed officials have lately expressed more concerns about deteriorating labor market conditions than rising inflation.

Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.

On Thursday, Fed Governor Christopher Waller cited that he will support lowering policy rates by 25 basis points (bps) in September as downside labor market risks have increased.

Ahead of the US PCE inflation data, the US Dollar (USD) trades almost stable. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades calmly around 98.00.

Silver technical analysis

Silver price trades slightly lower around $38.80 on Friday. The near-term trend of the white metal remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades around $38.28.

The 14-day Relative Strength Index (RSI) struggles to break above 60.00. A fresh bullish momentum would trigger if the RSI breaks above that level.

Looking down, the June 24 low of $35.28 will act as key support for the major. On the upside, the July 23 high near $39.53 will be a critical hurdle for the pair.

Silver daily chart