Silver bounced back sharply from the $26.00 support level last week, as the shiny-metal strongly outperformed gold on a weekly basis. With both nominal and real US yields on the rise its remains to be seen if silver can continue to bounce back on price dips.
The technical picture certainly remains bullish for silver, however, it is unclear how the metal will act again this week if the price of gold comes under further selling pressure and starts to take out some big downside levels, such as $1,760 and $1,700.
Non-yielding metals such as silver and gold may struggle to hold onto recent gains if the bond market continues to deliver the kind of performance that was witnessed last week. The prospect of US inflation and rising rates is certainly bad for silver from a fundamental perspective.
Something else to watch is the greenback. This could be the downfall or the saving grace for silver as the US dollar index is trading at a critical juncture at the moment. A bullish breakout in the US dollar index could cause a major sell-off in both gold and silver.
However, traders are still likely to use major price dips in both metals as a major long-term buying opportunity. Additionally, it is not clear whether the expected $1.9 trillion stimulus package from the Biden administration is already priced into silver.
Silver could still receive some bullish tailwinds from the stimulus announcement. This week’s Core PCE inflation reading from the US will be particularly closely watched by metals traders. This is the FED’s preferred inflation metric, and a strong reading could spook silver bulls.
According to the ActivTrader Market Sentiment tool traders still remain extremely bullish towards silver, and the positive sentiment has picked up over the last few days. I now have concerns that sentiment is getting too one-sided, and therefore we may see a correction to the downside in silver prices this week if this continues.
Silver short-term Technical Analysis
The current short-term technicals for silver show that the metal is trapped inside a large symmetrical triangle pattern. The pattern has formed on the one-hour time frame and is located between the $27.65 and $26.30 levels.
Last week silver tested both the top and the bottom of the symmetrical tringle. In fact, a false breakout took place under the triangle pattern last week, during the very brief price plunge towards the $26.00 support region.
According to the overall size of the pattern we should expect silver to stage a move of around $1.35 when a breakout from the mentioned triangle pattern finally takes place.
Source by ActivTrader.
Silver Medium-term Technical Analysis
According to the daily time frame the recent price drop to $26.00 helped to shape a noticeable bullish pattern. Technical analysis highlights that the inverted head and shoulders pattern could be forming a final right-hand shoulder.
The downside risk here is an extended price plunge under the $24.00 level. This may cause price brief capitulation towards the $22.00 area and possibly lower.
The Bollinger Band indicator is also highlighting that a major breakout is looming as the bands continue to tighten. The bands are still rising, which is a positive, and could imply near-term upside pressure.
Source by ActivTrader.