- Silver attracts some buying on Tuesday and holds above the 38.2% Fibo. level support.
- The setup favours bearish traders and supports prospects for an eventual breakdown.
- A sustained strength beyond the 50-day SMA is needed to negate the bearish outlook.
Silver regains some positive traction on Tuesday and sticks to its modest intraday gains, just below mid-$22.00s through the early European session. The white metal, however, lacks bullish conviction and remains well within the striking distance of a nearly two-month low touched on Monday.
Looking at the broader picture, the XAG/USD last week confirmed a bearish breakdown through the lower end of a multi-week-old trading range support near the $23.00-$22.90 area. Moreover, bearish technical indicators on the daily chart support prospects for an extension of the recent sharp pullback from the highest level since April 2022 touched last Thursday.
The XAG/USD, however, manages to hold above the $22.15 support zone, or the 23.6% Fibonacci retracement level of the recent rally from October 2022, which should act as a pivotal point. Some follow-through selling below the $22.00 mark will reaffirm the negative bias and drag the white metal to the next relevant support near the 100-day SMA, around the $21.60-$21.55 zone.
On the flip side, any meaningful recovery is likely to confront a hurdle near the aforementioned support breakpoint, around the $23.00-$22.90 region. This is closely followed by the 50-day SMA, currently around the $23.30-$23.35 region. A sustained strength beyond will negate the near-term bearish outlook for the XAG/USD and prompt some short-covering rally.
The momentum might then allow bulls to reclaim the $24.00 round figure. The XAG/USD could eventually climb back to the $24.55-$24.60 heavy supply zone en route to the $25.00 psychological mark for the first time since April 2022 and the next relevant hurdle near the $25.35 region.
Silver daily chart
Key levels to watch
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Silver prices remain in positive territory as the XAG/USD pair clings to gains near mid-$22.00s during Tuesday’s Asian session. The silver commodity shows a lack of a strong directional bias in recent trading days.
The lack of directional clarity reflects a complexity of various factors influencing the white metal. Initially, the outbreak of coronavirus globally weighed heavily on metals prices. However, the US Dollar’s recent sell-off is providing renewed optimism for silver prices.
Recently, the safe-haven bids remain volatile as market players remain skeptical over the state of the global economy. The latest figures from the US still point to a major blow to the economy as massive layoffs have yet to peak.
The focus now turns to the ongoing lockdowns and the potential for a second wave of virus infections. With the continuing spread of the virus and restrictions further tightened, it points to a slow recovery, which could drive demand for safe-havens like silver.
On the technical side, the XAG/USD pair is currently trading above the 21-day EMA line, suggesting the prevailing bullish bias. The next resistance could be seen at the 23.00 handle, which guards the 61.8% Fibonacci Retracement. Further ahead, the 24.00 handle may come into play as the bulls target higher levels.
In conclusion, the silver price remains supported by the recent US Dollar’s sell-off but could be more volatile and unpredictable as the coronavirus pandemic continues. Further developments over the spread of the virus and potential restrictions may also impact price action, potentially leading to further upside.
