Market Overview

Silver: a possible long road down  

Silver has lost 2.6% since the start of the day on Tuesday to $26.4 per ounce. After a failed attempt to climb above $30 per ounce on 7 April, the downside momentum in Silver has been replaced by sideways consolidation without significant bounces. 

Tuesday’s decline has an important implication on the tech analysis side. The sharp dip from the $27 level marked an exit beyond the corrective pattern, as the price dipped under 61.8% of the rise since late February. 

It will soon become clear whether the former local resistance in the 25.0-25.5 area has become support. If not, we are facing a whole range of negative scenarios. 

On the daily timeframes, a reversal pattern “head and shoulders” is formed with the price decline under the “neckline”. The realisation of this pattern is setting up for a pullback to $24.4. But this will probably only encourage the bears. 

It is not the first time since 2020 that Silver has tried to break above $30. A demonstration of resistance strength at this level is likely to discourage buyers, who have never managed to get the same breakout of the highs as we have seen in gold. 

Through 2023 and into 2024, the 200-week moving average has acted as an important anchor for Silver, keeping the price from going significantly lower for extended periods. A continuation of the same pattern suggests that the intensity of the sell-off will subside at levels below $23. In 2022, however, Silver briefly dipped 10% below this curve, outlining the risk of a decline to $21.3. 

An even more apocalyptic scenario is a massive liquidation of silver positions when it falls below the 200-week average, as we saw in 2020 and 2013 when the price dipped more than 30% below that curve. 

The FxPro Analyst Team

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