XAG/USD has been trading a consolidative manner since October 4th, staying slightly below the 22.86 barrier, which acted as a support on August 9th and 20th. The sideways activity came after the metal rebounded from near 21.42 on September 30th. The overall price structure though remains of lower lows and lower highs below the downside resistance line taken from the high of June 11th and thus, we would consider the medium-term outlook to be negative.
The consolidation near 22.86 suggests that the bulls have run out of strength after the rebound, and thus, we see decent chances for the bears to jump back into the action soon and perhaps push the action back down for another test at 21.42, the low of September 30th. If they are willing to overcome that barrier, we may then see them aiming for the 19.48 zone, which is defined as a support by the inside swing high of July 16th.
Shifting attention to our daily oscillators, we see that the RSI rebounded from 30, but flattened slightly below 50, keeping the momentum negative still, while the MACD, although negative, lies above its trigger line. Both indicators detect slowing downside momentum, which confirms the latest rebound and consolidation in the price action. However, as long as both oscillators stay below their equilibrium levels and the metal continues to respect its aforementioned downside line, we will see the chances of another round of selling as more than the chances of a bullish reversal.
In order to start examining the case of the latter, we would like to see a recovery back above 24.87, which is the high of September 3rd. Silver will already be well above the downside resistance line, and may encourage the bulls the drive the battle towards the high of August 4th, at 25.97, or the peak of July 6th, at 26.75. If neither barrier is able to stop the advance, then a break above 26.75 could carry larger bullish implications, perhaps setting the stage for extensions towards the 28.22 territory, which acted as a ceiling on February 23rd, and between May 18th and June 11th.
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