- The pound witnessed a dramatic turnaround from a three-week high hit on Tuesday.
- The slightly oversold RSI on the 1 hour chart could prevent bearish traders from placing further bets.
- Sustained strength above the $23.55 area is needed for the uptrend to resume.
The silver XAU it extended its sharp intraday pullback from near $24.00, or more from a three-week high hit earlier this Tuesday, and continued to lose ground during the early American session. The white metal has now reversed its gains recorded in the last two trading sessions and was last seen trading just above the $23.00 round level.
The aforementioned handle coincides with the 200 hourly SMA, which is closely followed by the 50% Fibonacci retracement level of the strong move up from $22.00-23.99. Technical indicators on the 4-hour chart have just started to slide into negative territory and also pulled back sharply on the daily chart, favoring bearish traders.
That said, the RSI (14) on the 1 hour chart is already showing mild oversold conditions and warrants some caution before placing any aggressive bearish bets. Therefore, it will be prudent to wait for some intraday consolidation or a convincing break below $23.00 before positioning for an extension of the intraday downside move.
The next relevant support is tied near the $22.75 region, which coincides with the 61.8% Fibonacci level. Some follow-through selling will be seen as a new trigger for bearish traders and pave the way for a drop towards the $22.50 level. XAG/USD could eventually drop to challenge double bottom support around the $21.40 area.
On the other hand, any significant move back above the 38.2% Fibonacci level, around the $23.55 zone, could now be seen as a selling opportunity and cap XAG/USD near the $23.55 hurdle. The latter marks the 23.6% Fibonacci level, which if decisively cleared will suggest that the corrective decline has run its course and set the stage for a new leg.
1 hour chart
Additional technical levels
Source: Fx Street
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