Silver Price Forecast:
- Silver price action enthralled by symmetrical wedge
- CCI suggests that Silver may be harboring oversold conditions
- Sentiment remains mixed
Silver prices have continued to trade sideways amid an array of political and fundamental events that continue to weigh on the greenback. After months of negotiations, US president Joe Biden is expected to reveal the size of the highly anticipated Fiscal Stimulus package later today, which once again raises the potential for inflationary concerns; a topic that has been at the forefront of the Federal Reserve since the start of the Coronavirus pandemic.
While Silver and Gold are often perceived as an inflationary hedge, a recent surge in Treasury Yields (particularly the 10 year) has jeopardized further strength for safe-haven assets as investors begin to price in inflation and the probability of rate hikes in the future, looking at US Treasuries and a recent rise in yields.
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Silver (XAG/USD) Technical Analysis
Silver prices continue to trade within a recent range, encapsulated by the bounds of a symmetrical wedge that has developed on the weekly chart. Meanwhile, the Fibonacci retracement levels from both the historical move (Nov 2008 – March 2011) and the short-term move (March 2020 – August 2020) continue to provide support and resistance for XAG/USD, with bulls and bears battling it out to push through these key levels.
Silver (XAG/USD) Weekly Chart
Chart prepared by Tammy Da Costa, IG
After failing to reach the psychological level of 2800, Silver prices fell to a key level of support, formed by the 23.6% Fibonacci level of the short-term move, at 2548.3. This level is now providing resistance for the precious metal, while the 61.8% retracement of the long-term move now holds as support at 2409.8. The Commodity Channel Index (CCI) currently rests at -88, bordering oversold territory with the current trend still in favor of the bears as price action remains below the 20-Day Moving Average.
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Silver (XAG/USD) Daily Chart
Chart prepared by Tammy Da Costa, IG
For now, support potential remains around the key psychological level of 2500 with the 61.8% Fibonacci retracement level providing additional support at 2409.8
Silver Client Sentiment
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At the time of writing, retail trader data shows 91.44% of traders are net-long with the ratio of traders long to short at 10.68 to 1. The number of traders net-long is 0.40% lower than yesterday and 2.68% lower from last week, while the number of traders net-short is 0.96% higher than yesterday and 2.31% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Silver price trend may soon reverse higher despite the fact traders remain net-long.
— Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
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