On a Knife Edge as Key Confluence Area Reached

SILVER PRICE, CHARTS AND ANALYSIS:

• Silvers Rally Stalled Yesterday as a Combination of Returning Risk Appetite and a Key Confluence Area Weighed on Price.
• Technicals are Providing Some Mixed Signals at Present on the Weekly and Daily Timeframes Highlighting the Importance of the $24.20 Handle.
• USD and the NFP Report Due Friday May Hold the Key to Silvers Longer Term Direction.
• To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.

SILVER (XAG/USD) FUNDAMENTAL BACKDROP

The price of Silver has enjoyed significant gains since bottoming out on March 10 around the $20.00 mark. We have put in 3 consecutive weeks of gains as the rally finally seems to have stalled around a key confluence area around the $24.00 level.

An interesting point to note is that the recent rally to the upside coincided with the collapse of SVB bank and the expected fallout by market participants. Silver much like Gold seems to have been one of the major beneficiaries while recent weakness in the US Dollar has kept the bulls charging forward.

We are seeing an overall improvement in market sentiment and a demand for risk assets return which could weigh on Silver prices moving forward. It is a big week for the US dollar as we have the NFP jobs report on Friday which could have a major part to play in Silvers next move. Ahead of that however we do have some Fed Policymakers speaking today with Dollar bulls hoping for some form of hawkish rhetoric to arrest the greenbacks recent slump.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

Just looking at the broader landscape and silver looks primed for a retracement following the recent $4 rally to the upside coupled with some of the Fundamental factors mentioned above. The technicals themselves appear to be painting a mixed picture at present however, with both bullish and bearish signs present.

SILVER (XAG/USD) Weekly Chart – April 4, 2023

Source: TradingView, Chart Prepared by Zain Vawda

The Silver weekly chart above shows price currently testing the long term trendline (May 2021 high) as well as a key area of support turned resistance around the $24.20 mark. The weekly bullish candle close from last week hints at further upside coupled with a golden cross pattern as the 20-day MA is about to cross above the 100-day MA, a sign of the upside momentum for Silver.

SILVER (XAG/USD) Weekly Chart – April 4, 2023

Source: TradingView, Chart Prepared by Zain Vawda

As we drop down to the daily timeframe however, we see more of the mixed technical signals mentioned earlier. The daily candle closed as a hanging man yesterday which usually hints at a potential direction change and push toward the downside. However, we have already seen a golden cross formation on the daily as the 20-day MA has crossed above the 50-day MA and is eyeing a cross above the 100-day MA as well. The mixed signals clearly a sign of the importance of the $24.20 handle and provides a host of scenarios that could develop from here.

A potential pullback from here and further decline in price may find strong support resting around $23.20 mark while below that we have the MAs providing support. Both the 20 and 100-day MA rest around the $22.50 handle and may prove a difficult level to break given the weaker dollar as well. Such a pullback may serve as an opportunity for would be longs to find a better risk to reward opportunity as the bullish trend remains intact.

Meanwhile a bullish breakout of the key confluence area and daily candle close above the descending trendline around the $24.20 level could see further gains for silver. The first key resistance area to the upside resting around the $26 mark, a price Silver hasn’t reached since April 2022. Whether either scenario will have the legs to follow through however, may rest entirely on the NFP jobs report due on Friday. Interesting times ahead for silver prices.

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda