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Silver recovered towards the $25.50 level last week as the shiny metal followed the price of gold higher, however, the short-term price trend for precious metal still remains far from certain at this point in time.
Precious metals received buying demand last week as the FOMC meeting minutes underscored the need for more policy support, while Chair Powell doubled down on his view that the US economy warrants further policy accommodation.
Appetite for silver is still lacklustre as the metal remains capped below its key 200-period moving average on the four-hour time frame, around $25.60. Typically, the 200-period moving average on the mentioned time frame is used to define the short-term price trend.
With this in mind, traders need to pay close attention to the $24.00 to $25.60 price range this week. Gains above the $25.60 level could cause gains in silver towards key rising trendline resistance towards the $27.00 area.
It is likely that a rally in gold towards the $1,800 level may be needed in order for the mentioned bullish scenario in silver prices to take place. Gold has a notable price vacuum between the $1,760 and $1,800 levels this week that is worth watching.
To the downside, repeated failure above the $25.00 level could cause a major reversal in silver prices towards the $24.00 area. The price of silver will be in desperate trouble if sustained weakness below the $24.00 take places, due to a head and shoulders pattern being activated below the $24.00, which holds a $6.00 downside projection,
On the fundamental front, this week scheduled speech from Chair Powell and US retail sales report could set the tone for precious metals. Any shift in the markets thinking towards the FED’s policy could cause silver to tumble further.
The recent rejection from the $26.00 resistance level is incredibly bearish for silver on the technical front. Extended weakness below the $24.00 level this week and the short-term technicals look even worse.
According to the ActivTrader Market Sentiment tool traders are extremely bullish towards the price of silver, despite the short-term bearish trend. The sentiment indicator shows that some 85 percent of traders are positive towards silver. Typically, such a one-way skew does not bode well, so extreme caution is advised here.
Silver short-term Technical Analysis
The short-term technicals for silver show that a bearish head and shoulders pattern, with a downside projection of over $5.00 is still forming. The latest recovery could mean that silver is forming a final right-hand shoulder to complete the bearish pattern.
Weakness under the $24.00 support level is needed to ignite the bearish price pattern, which holds a downside projection of around $6.00.
In the near-term a battle is currently underway, with silver’s 200-period moving average on the four-hour time frame, around the $25.60 level.
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Silver Medium-term Technical Analysis
According to the daily time frame bulls need defend $25.00 area to avoid the price of silver turning technically bearish and closing below its key 200-day moving average.
A major change in thinking towards silver could take place if silver turns technically bearish, and traders may then sell the metal in expectation of much lower prices over the medium-term horizon.
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