XAG/USD surged yesterday, after hitting support near the upside line drawn from the low of February 12th. The rally continued today as well, with the white metal now trying to overcome the 18.35 barrier, defined as a resistance by the peak of January 27th. Overall, the price is trading above the prior downside resistance line drawn from the high of January 8th, as well as above the pre-mentioned short-term upside one. Therefore, we would consider the short-term outlook to be positive for now.
If the bulls are strong enough to distance themselves from the 18.35 hurdle, we could soon see them challenging the 18.50 zone, marked by the high of January 6th. Given the overstretched rally though, they may decide to lock some profits near that zone, and thereby allow a small negative correction. That said, as long as such a potential correction stays limited above the short-term upside line, we would see decent chances for the bulls to jump back into the action. If they manage to reach and breach the 18.50 hurdle this time around, they may put the 18.84 zone on their radars. That zone is marked as a resistance by the peak of January 8th.
Looking at our short-term oscillators, we see that the RSI lies above 70 and continues to point up, while the MACD, already above both its zero and trigger lines, is pointing north as well. Both indicators detect accelerating upside speed and support the notion for some more advances in this metal.
Now, in order to abandon the bullish case, we would like to see a decisive dip below 18.09. Such a move may also drive the price below the short-term upside line and could initially allow declines towards the 17.90 zone, which is slightly above Monday’s peak and is marked by an intraday swing high formed yesterday. Another break, below 17.90, may carry more bearish implications, perhaps paving the way towards Monday’s low, at around 17.72.
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