Silver Price Analysis: XAG/USD recovers from yearly low and rises near the $21.00 level

• Silver price gains positive traction on Friday and reverses a portion of the previous day’s decline to the yearly low.
• The extreme oversold on the RSI (14) on the daily chart is seen as a key factor driving short covering.
• The breakout point of the support double bottom near the $21.40 area should limit any significant upside.

Silver price (XAG/USD) is undergoing a short-covering bounce on the last day of the week and recovers some of the previous day’s decline to its lowest level since July 2020. Recovery momentum has extended at the start of the European session and has seen XAG/USD come back close to the $21.00 level.

With RSI (14) on the daily chart showing extreme oversold conditions, investors opted to lighten their bearish positions around XAG/USD amid a modest US dollar pullback from a two-decade high. However, it seems that a significant rally has yet to take place amid risk appetite in the markets.

The previous day’s move below double bottom support near the $21.40 region was seen as a new trigger for bearish trading. This comes on top of the recent break of an ascending trendline and suggests that the attempted recovery is in danger of fading fast.

Therefore, any subsequent move higher is more likely to face stiff resistance and remain capped near the aforementioned breakout point around the $21.40 area. That said, sustained strength above this region has the potential to lift XAG/USD and allow the bulls to reclaim the $22.00 round level.

On the other hand, the yearly low, around the $20.65-$20.60 zone, seems to defend the immediate drop. Some continuation selling would reaffirm the short-term negative bias and make XAG/USD vulnerable to slipping to challenge the psychological $20.00 level.

silver daily chart

Silver additional levels