Silver (XAG/USD) Technical Analysis
- The rise in the dollar caps silver upside potential after Powell’s hawkish comments
- Silver has broken beneath the ascending channel – now what?
- Daily chart reveals pennant-like consolidation just above the 200 SMA
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
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Silver Breakdown of the Ascending Channel (Weekly Chart)
Silver, like gold, has shown a propensity for downside moves after registering a breakdown of the multi-month ascending channel. Admittedly, the channel is not the cleanest, having registered a false breakout just before the March regional banking turmoil which catapulted precious metal prices.
If Jerome Powell’s statements yesterday that the US regional banking system is sound is to be witnessed going forward, this would offer less of a bullish driver for silver prices meaning the current channel break may have a better chance of succeeding.
Silver Weekly Chart
Source: TradingView, prepared by Richard Snow
Silver Sell-off Meets a Decent Amount of Support but Not Insurmountable
The daily chart below shows the attempted pullback which has turned into more of a consolidation as Jerome Powell’s comments lifted the dollar, capping silver’s upside potential for now.
After three successive days of selling (beginning on the 20th of June) silver still appears to favour a bearish continuation scenario. The RSI is far from oversold conditions and the MACD shows momentum to the downside remains in place although the MACD line is edging closer to the signal line – a potential sign of slowing momentum.
Support for the metal takes on many forms with the most immediate challenge being the 200-day moving average (SMA) which nestles right under current prices. A decisive move below the measure often used to determine the trend, could open the door to an extension of the bearish move. Thereafter, the 38.2% Fibonacci retracement of the 2021 to 2022 decline provides the next level of support at 22.35. Not far from there is another potential zone of support between 21.40 and 22.10.
If the silver market is able to conquer the above mentioned levels of support, that would leave a whole lot of room to run before the 23.6% Fib level at 20.52. In the event prices move higher from here, 23.83 is the next level of consideration with 24.65 coming into focus thereafter.
Silver Daily Chart
Source: TradingView, prepared by Richard Snow
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX