Silver Price Analysis: XAG/USD remains depressed below $27.00, looks vulnerable

• Silver prices remain under some selling pressure for the second consecutive day, although there is no follow-through selling.
• The technical setup favors the bears and supports the prospects for a further downward move.
• Any significant move higher is likely to attract new sellers and remain limited near the 100-day SMA.

Silver (XAG/USD) is pulling back for the second consecutive day on Monday and is trading below the mid-$27.00 area during the Asian session. However, the white metal remains confined to a broader range held over the past week or so and looks vulnerable to extending the recent downward trajectory seen over the past month or so.

From a technical perspective, Friday’s failure near the 23.6% Fibonacci retracement level of the July-August drop and some follow-through selling validate the near-term negative outlook for XAG/USD. Moreover, oscillators on the daily chart remain deep in negative territory and are still far from being in the oversold zone. Therefore, a subsequent drop below the $27.00 mark, towards the multi-month lows zone near $26.50-$26.45 touched last week, seems a distinct possibility.

A convincing break below the latter will be considered a fresh trigger for the bears and drag the XAG/USD further towards the May monthly low, around the $26.00 mark. The white metal could extend the downtrend and eventually drop towards the intermediate support near the $25.60 horizontal zone en route towards the psychological $25.00 mark.

Conversely, a move beyond the 23.6% Fibonacci level around the $27.75 region could trigger a short-covering rally and pave the way for some significant gains. The XAG/USD pair could then rally beyond the $28.00 round-mark, towards the 38.2% Fibonacci level around the $28.50-$28.55 region. Any further upside move, however, is more likely to attract fresh sellers and remain capped near the 100-day simple moving average (SMA) support breakout point, currently located near the $28.75-$28.80 zone.

The latter should act as a key pivot point, which if cleared decisively could negate the near-term bearish outlook. The XAG/USD could then reclaim the $29.00 mark and appreciate further towards the next relevant hurdle near the $29.45 zone. The recovery momentum could extend further towards the 61.8% Fibonacci level around the $29.75 region before bullish traders aim to reclaim the psychological $30.00 mark.

Silver daily chart