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Silver is coming back under downside pressure in early-week trade as the greenback starts to gain strength and US 10-year bond yields hold close to the highs of 2021. Today’s key speech from Federal Reserve Chairman Jerome Powell is likely to set the tone towards precious metals for the week.
Weakness in the price of gold is also weighing on silver at the moment. Gold is likely to remain technically pressured while trading below the $1,760 resistance level this week and is vulnerable to further losses towards the $1,600 level.
The shiny-metal has reversed sharply from the $26.50 level over recent sessions, as bulls failed to overcome silver’s 200-period moving average on the four-hour time frame. The implication is that silver remains bearish in the short-term while trading below the 200-period moving average.
In terms of technicals, the $24.90 level is the big level to watch this week. The $24.90 level is the location of a large head and shoulders pattern neckline, and the weekly Parabolic SAR indicator will turn bearish for the first-time since November last year if the price holds under the $24.90.
Furthermore, a drop under the $24.90 level is likely to see silver testing towards its trend-defining 200-day moving average, at $24.50. For the record, silver has traded above its 200-day moving average since May last year.
A series of bearish price patterns are also showing that silver is technically challenged below the $26.50 resistance zone. The targets of these bearish price patterns currently range from $22.00 to $20.00,
In summary, the next major directional moving is brewing. Silver is likely to come under significant short-term pressure if the $24.90 level is overcome this week, while gains above the $26.50 level will shift the short-term trend in favour of bulls.
According to the ActivTrader Market Sentiment tool traders have turned extremely bullish towards silver. Sentiment is around 87 percent positive, which is a significant one-way skew. I have serious concerns that silver prices will continue to fall as the herd are flocking to the long side in almost record numbers.
Silver short-term Technical Analysis
The short-term technicals for silver show the metal has fallen sharply after breaking below a rising wedge pattern this morning. According to the size of the pattern silver could be headed back towards the worst levels of the month.
The recent heavy rejection from the 200-period moving average on the four-hour time frame last week is also a concern in the short-term.
Aggressive selling took place as bears started to pile in as silver moved back towards the 200-period MA, and the price has now fallen below all key forms of support on the Ichimoku indicator.
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Silver Medium-term Technical Analysis
According to the daily time frame bulls need defend the $24.50 to $24.90 area this week to avoid a technical meltdown over the medium-term horizon.
A bearish head and shoulders pattern, with a downside projection of over $5.00 is currently looming over the price of silver. A sustained decline below the $24.90 support level is needed to activate this huge bearish pattern.
Traders also need to keep an eye on silvers 200-day moving average this week, around the $24.50 support area. A move under this key technical metric would be huge for bears.
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