Silver Price Forecast: XAG/USD plunges to near $41.70 ahead of Fed's monetary policy outcome

• Silver price plummets to near $41.70 ahead of the Fed and BoC's monetary policy announcement.
• Both the Fed and the BoC are expected to cut interest rates.
• Investors will also focus on the Fed's dot plot and Summary of Economic Projections.

Silver price (XAG/USD) is down almost 2% to near $41.70 during the European trading session on Wednesday. The white metal dives swiftly ahead of the Federal Reserve's (Fed) monetary policy announcement at 18:00 GMT.

The Fed is nearly certain to cut interest rates in its policy meeting as risks to the United States (US) labor market have increased and the impact of tariffs on inflation doesn't appear to be persistent.

According to the CME FedWatch tool, traders see a 96% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.00%-4.25%, while the rest support a bigger reduction of 50 bps.

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

In the monetary policy announcement, investors will also focus on the Fed's dot plot, which shows where policymakers see interest rates heading in the near and long term, and the Summary of Economic Projections (SEP).

Analysts at Deutsche Bank have projected the Fed to cut interest rates in all three policy meetings remaining this year.

In Wednesday's session, investors will also focus on the Bank of Canada's (BoC) monetary policy announcement at 13:45 GMT. The BoC is expected to cut interest rates by 25 basis points (bps) to 2.5%.

Silver technical analysis

Silver price faces selling pressure near the upper end of the Rising Channel formation. However, the near-term trend of the white metal remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around $40.75.

The 14-day Relative Strength Index (RSI) cools down to near 63.00, and is likely to find cushion near 60.00. A fresh bullish momentum would emerge if the RSI holds above 60.00.

Looking down, the psychological figure of $40.00 will be a key support for the Silver price. On the upside, the September 16 high of $43.00 will be a major barrier.

Silver daily chart