- Silver stages touched a solid bounce off a more than two-month low this Friday.
- The setup requires some care before positioning for any further recovery.
- A sustained move above $24.00 could negate the bearish outlook.
Silver is gaining strong positive traction on Friday, snapping a four-day losing streak in the $22.70-$22.65 area, above the two-month low touched today. The white metal has maintained its bid tone during the early North American session and is currently trading around the $23.20-$23.25 zone, up more than 2% on the day.
Slightly oversold relative strength index (RSI) for the day diagram is proving to be a key factor driving aggressive short-covering around XAG/USD. This means a convincing break above the 100-day Simple Moving Average (SMA) support this week and an overnight dip below 50% Fibonacci the March-May retracement level favors bearish traders. This in turn suggests that any subsequent move up may still be seen as a selling opportunity and is in danger of disappearing rather quickly.
The 100-day SMA support break point, which is currently fixed around the $23.35 region, is likely to act as an immediate barrier. Followed by 38.2% Fibo. levels, near the $23.75 zone, above which XAG/USD could climb to the $24.00 level. This should act as a pivotal point which, if decisively cleared, could trigger a new wave of short covering movement and lift the commodity further beyond the $24.20-24.25 level. The recovery momentum could extend towards $24.50-24.60, a strong support break.
On the other hand, the monthly low around the $22.70-$22.65 region now seems to protect the immediate downside from the 61.8% Fibo. level, near the $22.25 area. Some subsequent selling that led to a subsequent decline below $22.00 should pave the way for an extension of the recent decline from the more than one-year high touched earlier this month. XAG/USD could then accelerate the fall towards the $21.55-$21.50 intermediate support, before finally dropping to around $21.00.
