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Silver Prices Compress Below Key Resistance

Silver Prices Compress Below Key Resistance

Wednesday Market Overview:

The recent cooling in the U.S. labor market, as evidenced by weaker-than-expected nonfarm payrolls and a rising unemployment rate, has fueled speculation that the Federal Reserve may shift toward rate cuts. This outlook has weakened the U.S. dollar, which, in the long term, supports higher silver prices. However, the broader economic landscape presents challenges, with concerns about a potential short-term recession that could dampen industrial demand for silver. This, coupled with ongoing equity market pressure, has led to a correction in silver prices.

Technical Analysis:

In the daily chart, silver has been unable to reclaim the previously broken support at 27.302 for three consecutive days, indicating a potential bearish consolidation. The price is compressing between this resistance and the support at 26.781, forming lower highs and lower lows, which are typically indicative of a bearish trend. Additionally, the death cross between the 34-day and 100-day moving averages further strengthens the bearish outlook.

If sellers can decisively break through the 26.781 support level in the coming days, the downtrend could extend towards 26.119 and 25.387. Sustained bearish momentum could eventually drive the price down to the key support level at 24.204, marking a significant downside target for sellers.

Alternative Scenario:

If buyers manage to defend the 26.781 support and push the price back above the key level of 27.302, it could indicate a reversal. In this scenario, the next resistance levels to watch are 28.034 and 29.217. Only a break above 29.217, where the moving averages converge, would invalidate the current bearish trend and signal a potential bullish reversal.

Oscillator Confirmation:

Both the RSI and MACD oscillators are aligned with the bearish outlook, with the RSI trending downward and moving closer to oversold territory, and the MACD lines below the signal line, indicating strengthening bearish momentum. The alignment of these oscillators with the broader technical setup suggests that the bearish trend is well-supported.

Key Levels:

Resistance Levels:

  • Resistance 3: 29.217
  • Resistance 2: 28.034
  • Resistance 1: 27.302

Current Price (at the time of analysis): 27.068

Support Levels:

  • Support 1: 26.781
  • Support 2: 26.119
  • Support 3: 25.387
  • Support 4: 24.204

Fundamental Factors and Market Sentiment:

Traders are closely monitoring U.S. economic data, particularly any developments following the Federal Reserve’s recent policy signals. Additionally, China’s upcoming economic data, including the yuan lending rate, could have a significant impact on market sentiment. Given China’s crucial role in global silver consumption, any signs of slowing economic growth or further monetary easing by the People’s Bank of China could negatively impact industrial demand for silver.

Conclusion:

Silver is at a critical juncture as it consolidates below a key resistance level, with the market awaiting further cues from both the Federal Reserve and global economic data. The current technical indicators favor the sellers, with the potential for further declines if support levels are breached. However, a break above resistance could shift the momentum back in favor of buyers, making it a pivotal moment for traders. Investors should remain vigilant, as upcoming data releases could significantly influence silver’s direction in the near term.

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