- Silver consolidates its recent drop to a two-year low and remains range bound.
- The setup favors the bears, although the oversold RSI on the daily chart warrants some caution.
- Sustained weakness below the $19.00-$18.90 zone is needed to confirm a further bearish breakout.
Silver continued its struggle to post any significant recovery from a two-year low and has been trading in a tight range for the past four sessions. Range-bound price action constitutes a rectangle formation on technical charts and points to investor indecision about short-term direction.
Considering last week it convincingly broke below downtrend channel support, the indecisive move could still be classified as a bearish consolidation phase before the next move lower. That said, the oversold RSI on the daily chart prevented the bears from opening new positions and positioning themselves to further push the price lower.
Therefore, a follow up sell below the $19.00-$18.90 region, or the yearly low hit last week, is needed to confirm a further bearish breakout. XAG/USD would then become vulnerable to accelerate the move down to test the $18.00 round level on the way to the next relevant support near the $17.65 area.
On the other hand, the upper bound of the nearly week-long range around the $19.50-$19.55 zone could continue to act as an immediate hurdle. Any subsequent move higher is more likely to be met by fresh selling and exhaustion near the breakout point of descending channel support, now turned resistance, near the $19.75-$19.80 zone.
This area is closely followed by the psychological $20.00 level, which if breached decisively could trigger a short-covering move. XAG/USD could then break through an intermediate barrier near the $20.60-$20.65 area, which coincides with the 100-period SMA on the 4-hour chart, and aim to reclaim the $21.00 level.
This latest level marks the upper limit of the aforementioned descending channel and is also close to the 200-period SMA on the 4-hour chart. If strength remains above that region, XAG/USD will have formed a solid base near $19.00 and will pave the way for a further near-term appreciation move.
Silver 4 hour chart
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silver key levels
Source: Fx Street
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