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  • Silver witnessed some fresh selling on Wednesday and finally broke below the $25.00 mark.
  • The formation of a descending channel points to a well-established short-term bearish trend.
  • Bears might now look for a sustained break below trend-channel/200-DMA confluence support.

Silver weakened further below the key $25.00 psychological mark and dropped to over two-month lows during the mid-European session. The commodity was last seen trading near the $24.75 region, down over 1.75% for the day.

Looking at the technical picture, the white metal has been trending lower along a downward sloping channel over the past one week or so. The lower boundary of the trend-channel, around the $24.60 region coincides with the very important 200-day SMA, which if broken decisively should pave the way for a further downfall.

Meanwhile, technical indicators on the daily chart have been drifting lower in the bearish territory and add credence to a short-term bearish trend. However, RSI (14) on hourly charts have moved on the verge of breaking into the oversold territory and warrants some caution before placing any aggressive bearish bets.

That said, the near-term bias remains tilted firmly in favour of bearish traders and supports prospects for an extension of the downtrend. A convincing break below the trend-channel/200-day SMA confluence will reaffirm the bearish outlook and drag the XAG/USD towards YTD lows, around the $24.00 mark, touched on January 18.

On the flip side, any recovery attempt back above the $25.00 mark might now be seen as a selling opportunity and remain capped near the overnight swing highs, around the $25.35 region. This coincides with the trend-channel resistance, which if cleared decisively will negate the negative bias and prompt some aggressive short-covering move.

The XAG/USD might then aim back to reclaim the $26.00 mark. The momentum could further get extended and push the commodity back towards the $26.40-50 supply zone, tested in the aftermath of the dovish FOMC statement last week.

XAG/USD 1-hourly chart

fxsoriginal

Technical levels to watch