As one of the best-performing assets last month and indeed perhaps 2020 so far, Silver continues to dominate the headlines along with Gold as investors seek traditional safe-havens to park funds. In today’s Chart of The Day, we examine XAGUSD to discover where the precious metal price may be heading.
The first thing to notice on the hourly chart above is how well price action responds to the 20-Day moving average (red line) regarding overall support and resistance. This indicator is currently providing resistance for XAGUSD and generating this downward channel that began at the start of the month.
This short-term bearish move makes more sense when combined with the daily chart listed below, where we saw the emergence of a Doji candle on September 1st. It suggests buyers became unsure or indecisive following the massive price surge of July/August, and in-turn created an opportunity for both a sell-off and profit-taking scenario.
So where to next for Silver prices?
Both history and logic suggest that longer-term, it will continue to appreciate so long as Gold maintains it’s a bullish stance. However, we cannot ignore the strength of the current bearish channel on the hourly chart. We’d also expect a general price correction to be on the horizon following such an impressive rally.
Should a corrective move eventuate, the nearest downside target where we might see an uptick in demand seems to be around the $26.00 mark. Also, if we apply a Fibonacci tool from the beginning of July to the most recent high, then a possible longer-term downside target of $24.70 looks viable as a 50% retracement level.
Adding further to the speculation that Silver prices may continue to fall in the interim, I’ve highlighted a bearish divergence pattern developing on the daily RSI indicator. It suggests perhaps a deeper reversal than some may anticipate.
To the upside, the $30.00 resistance level will be critical to watch for any Silver bugs from now on, before attempting to contemplate re-testing the all-time high of $49.81 an ounce. Although, with everything that’s happened so far during 2020, anything is possible.
Note: Click on charts to enlarge.
By Adam Taylor CTEe
Sources: Go Markets, Meta Trader 5, TradingView, Bloomberg
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