Silver Price Analysis: XAG/USD recovers early lost ground to $23.00 area, lacks follow-through
- Silver attracts dip-buying on Wednesday and stalls the overnight pullback from a two-week top.
- The mixed technical setup warrants some caution for bullish traders ahead of the FOMC decision.
- A sustained strength beyond the 200-day SMA should pave the way for additional near-term gains.
Silver reverses modest intraday losses to the $23.00 neighbourhood and turns neutral during the early European session on Wednesday, albeit lacks follow-through. The white metal currently trades around the $23.20 area, unchanged for the day, and for now, seems to have stalled its retracement slide from a nearly two-week high touched on Tuesday.
From a technical perspective, the recent goodish rebound from the $22.30 support area – representing an ascending trend line extending from the June monthly low – and the emergence of some dip-buying on Wednesday favours bullish traders. That said, the overnight failure to find acceptance above the 38.2% Fibonacci retracement level of the August-September fall and a pullback from the vicinity of the very important 200-day Simple Moving Average (SMA) warrants some caution.
Moreover, oscillators on the daily chart – though have been recovering from lower levels – are still far from confirming a positive bias. Hence, any subsequent move up might continue to attract fresh sellers and is more likely to remain capped near the 200-day SMA, currently pegged near the $23.40-$23.50 area. A sustained strength beyond, however, might prompt a short-covering rally and lift the XAG/USD to the 100-day SMA barrier, around the $23.80 region, en route to the $24.00 mark.
The next relevant hurdle is pegged near the $24.30-$24.35 region, which if cleared decisively should pave the way for a move towards reclaiming the $25.00 psychological mark. The latter coincides with the August monthly swing high and is followed by the July peak, around the $25.25 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move for the XAG/USD.
On the flip side, the daily trough, around the $23.05 area, now seems to protect the immediate downside, ahead of the 23.6% Fibo. level. Any further decline could find decent support near the $22.30 region, or a nearly one-month low touched last Thursday. Failure to defend the said support levels will confirm a bearish breakdown and make the XAG/USD vulnerable. The white metal could then accelerate the downward trajectory towards the next relevant support near the $21.25 zone before eventually dropping to the $21.00 round-figure mark.