The price of silver is trapped towards the $26.00 area as precious metals continue to trade on the backfoot due to the US dollar index trading at a 2.5 month high, and gold struggles to move back above the $1,800 level.
Today’s Non-farm payroll job report could be a big deal for silver traders as a strong than expected headline number could cause further US dollar strength, which would be bad for precious metals in general such as silver, gold, and copper.
It is clear that silver has a close inverse price correlation with the US dollar index so it will be particularly crucial that the greenback holds under the 93.45 level in order for a reversal to take place.
Gold demand is also a problem for silver right now. The two metals share a strong price correlation and a weak demand for the yellow metal and a subsequent price drop under the current weekly trading low, around $1,755, could create serious problems for silver prices.
The current technical picture is bearish for silver is bearish in the short-term. A major trendline is likely to come in focus if the $25.45 support level is broken, which is where the uptrend line for spot silver since December 2020 is found.
Last week the ActivTrader Market Sentiment tool showed some 88 percent of trader held a bullish sentiment bias towards silver. The Market Sentiment tool now shows that 86 percent of traders bullish towards silver.
Traders have remained rigid in their view that silver prices are rising since the shiny metal lost the $28.00 support region last month. Current high sentiment levels are a major concern for me right now.
Silver short-term Technical Analysis
The short-term technicals for silver show that a false breakout from a descending triangle pattern took place this week, and silver has now moved back inside the triangle, between the 26.45 and 25.50 levels.
According to the overall size of the mentioned pattern traders should prepare themselves for a 100-point price move once a definitive move from the triangle pattern takes place.
Silver Medium-term Technical Analysis
The daily time frame shows that the price of silver is testing its 200-day moving average, around $26.00. This has been the case for around one-week, and the failure to rally from this key metric is a concern.
Silver is also sitting around the neckline of a head and shoulders pattern. The pattern holds a downside projection of around $3.00, making this a key moment for silver.
Overall, watch out for a rebound towards the $29.00 if the pattern is invalidated or a price collapse towards the $23.00 if the pattern is activated.