XAG/USD remains vulnerable to retest sub-$22.00 levels

• Silver meets with a fresh supply and touches over a two-week trough on Wednesday.
• The technical setup favours bearish traders and supports prospects for further losses.
• Any attempted recovery could be seen as a selling opportunity and fade rather quickly.

Silver (XAG/USD) comes under some renewed selling pressure following the previous day’s modest uptick and drops to over a two-week low during the first half of the European session on Wednesday. The white metal currently trades near the $22.30 area, down just over 0.60% for the day, and seems vulnerable to slide further.

The recent failure near a descending trend-line resistance, ahead of the very important 200-day Simple Moving Average (SMA), and a subsequent breakdown through a short-term trading range validate the negative outlook. Moreover, oscillators on the daily chart have been gaining negative traction and are still far from being in the oversold territory. This, in turn, suggests that the path of least resistance for the XAG/USD is to the downside.

Hence, some follow-through decline towards retesting sub-$22.00 levels, or a two-month low touched in January, looks like a distinct possibility. The downward trajectory could get extended further towards the $21.40-$21.35 intermediate support before the XAG/USD weakens further below the $21.00 mark, towards the October swing low near the $20.70-$20.65 zone.

On the flip side, attempted recovery moves might now confront some resistance near the $22.45-$22.50 area. A sustained move beyond could trigger a short-covering rally, though runs the risk of fizzling out rather quickly ahead of the $23.00 round-figure mark. This is followed by the 200-day SMA, near the $23.25-$23.30 supply zone, which if cleared decisively should set the stage for additional gains and allow the XAG/USD to reclaim the $24.00 mark.

Some follow-through buying has the potential to lift the metal towards the next relevant hurdle near the $24.50-$24.60 area and the $25.00 psychological mark. The momentum could get extended further towards the $25.45-$25.50 intermediate barrier before the XAG/USD eventually climbs to the $26.00 neighbourhood or the December swing high.

Silver daily chart

Technical levels to watch