- Silver price gains some positive traction on Tuesday, although there was no continuation buying.
- The breakout of the rising wedge favors the bears and supports the prospects for further losses.
- Sustained strength beyond the $22.25 confluence is needed to negate the bearish outlook.
On Tuesday, silver has attracted some buying near the $21.65 area and has reached its daily high during the first half of the European session. However, the bulls have failed to capitalize on this move and spot prices have remained below the $22.00 level, warranting caution before positioning for further gains.
From a technical point of view, the previous day’s rejection from the 61.8% Fibonacci retracement of the $23.28 drop to $20.46 dragged XAG/USD below an uptrend line. This, along with another rising trendline, constituted the formation of a bearish rising wedge pattern.
The aforementioned support break point coincided with the 100-period SMA on the 4-hour chart and the 50% Fibonacci, which now seemed to cap the upside for XAG/USD. Meanwhile, the oscillators on the daily chart remain in negative territory, but have yet to confirm a bearish bias on the hourly chart.
However, the technical setup favors the bears and supports the prospects for further losses. XAG/USD looks vulnerable to pull back to test the 38.2% Fibonacci around $21.50 before eventually falling to the $21.30 zone en route to the 23.6% Fibonacci around the $21.10 region.
Some continuation selling would expose the low of the last few years around the $20.45 zone touched earlier this month. The move down could extend further and allow sellers to challenge the psychological $20.00 level.
On the other hand, a push above the $22.00 round level could continue to face stiff resistance near the $22.25 confluence. This barrier represents the 61.8% Fibonacci and the upper limit of the rising wedge, which if broken decisively will nullify any short-term negative bias.
Silver 4 hour chart
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Key levels to watch
Source: Fx Street
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