Spot Silver Analysis:
Silver Consolidates Following FOMC Minutes
The US Dollar strengthened slightly after the Federal Reserve reiterated its dovish position in last night’s FOMC meeting, adopting a ‘wait and see’ approach for policy going forward. While policy remains unchanged, demand for Gold, Silver and other safe-haven assets retreated, pushing price action back into its range-bound state.
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The recent surge in Silver has seen price action favoring the bulls, with the precious metal testing the psychological level of 30.00 in August. However, failing to break above this level, saw bears exerting downward pressure on XAG/USD, into a zone of confluency between key Fibonacci levels which have provided support and resistance for some time. Meanwhile, the Stochastic indicator remains above 80, a possible indication that Silver is currently trading in overbought territory.
XAG/USD Monthly Chart
Chart prepared by Tammy Da Costa, IG
Silver Remains Above Moving Average – For Now
From a short-term perspective, the daily chart below highlights that price action remains above the 50-day Moving Average (MA) and a bullish continuation is still likely. The Moving Average Convergence/Divergence (MACD) has crossed below the signal line from above, possibly indicating that upward momentum has decreased although the fact that it remains above zero, means that the trend has not reversed just yet.
A key level of support, now remains at the psychological level of 26.00, which is also the 38.2% Fibonacci retracement level for the move between March 2011 high and March 2020 low. If bears can break below this level, selling pressure may increase with 25.00 being the next level of interest.
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XAG/USD Daily Chart
Chart prepared by Tammy Da Costa, IG
On the contrary, as long as 26.00 holds as support, bulls may be able to regain favor, in an effort to test August levels or at least in an effort to reach the psychological level of 28.00.
Client Sentiment
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How does sentiment affect the market?
IGCS shows retail traders are currently showing a bullish bias to Silver, with 88% of traders holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment, and the fact traders are net-long is suggestive of a short-term price move to the downside.
— Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
