XAG/USD fell sharply on Friday following the better-than-expected US employment data for July. Today, the metal opened with a large negative gap below 23.70, but recovered a decent portion of today’s slide during the Asian session today, returning back above 23.70. Overall, the metal continues to trade below the prior upside support line drawn from the low of November 30th, and thus, we would still see a negative near-term outlook, even if the price continues to recover for a while more.
As we already noted, the recovery may continue for a while more, perhaps for the metal to challenge once again the territory near 25.55. If the bears decide to jump back into the action from near that zone, we could see another fall below 23.70. This time, the break below 23.70 may open the way towards the 21.80 barrier, which is near the lows of September 24th and November 30th. If that level doesn’t hold and breaks, then we could see the fall extending towards the 19.50 level, defined as a support by the inside swing high of July 15th.
Shifting attention to our daily oscillators, we see that the RSI moved lower and just touched its toe below its 30 line, while the MACD, already slightly negative, has just crossed below its trigger line. Both indicators detect downside speed, confirming our view that another round of selling may be possible soon.
On the upside, we would like to see a recovery above 28.40, which provided resistance between May 18th and June 11th, before we start examining whether the bulls have gained full control. This could also confirm the break above the downside resistance line drawn from the high of February 1st, and may see scope for extensions towards that high, at around 30.05. Another break, above 30.05, could take the white metal into territories last seen in the beginning of 2013, with the next territory to consider as a resistance being the high of January 20th, at around 32.50.
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