According to the main swing chart, Spot Silver (XAGUSD) is still in an uptrend due to the higher-top, higher-bottom formation which started at $61.00 on March 23. A trade through $89.38 will signal a resumption of the uptrend, while a trade through $70.86 changes the main trend to down.
The 50% to 61.8% retracement zone of the main range is $75.19 to $71.84. This area overlaps a long-term Fibonacci level at $74.63. On Monday, XAGUSD tested this area and buyers stepped in at $73.86, turning the market positive into the close.
Following this move, a new swing was created at $89.38 to $73.86. If buyers generate any near-term momentum, we could see a quick pop to this swing’s retracement zone at $81.62 to $83.45. Trader reaction to this area will determine the near-term direction of the market.
Moving average analysis tells us that the key level to watch today is the 50-day moving average at $76.63. Trader reaction to this indicator will set the tone into the close. While this short-term indicator is acting like a pivot, the 200-day MA is our long-term trend indicator. It supports the uptrend we’re seeing on the swing chart.
As for today, trader reaction to the 50-day MA will tell us if the bulls or the bears are in control. If the bulls are then look for a near-term surge into $81.62 to $83.45. If the bears are then the market could retest $75.19 to $71.84. A failure at this zone makes the swing bottom at $70.86 and the 200-day MA at $65.25 vulnerable to attack.
What to Watch
The Federal Reserve outlook is the driver that determines where silver goes from here. Inflation staying elevated keeps rate hike odds on the table. Rate hike odds keep yields elevated. Elevated yields keep the dollar supported. A supported dollar keeps pressure on Spot Silver (XAGUSD). That chain is intact right now and nothing in the near-term data calendar is likely to break it cleanly.
The 50-day moving average at $76.63 is the level that sets the tone today. Bulls need to hold it. Lose it and the retracement zone at $75.19 to $71.84 gets tested again. A failure there puts the swing bottom at $70.86 and the 200-day moving average at $65.25 in play. On the upside $81.62 to $83.45 is the first area where sellers are likely to reassert themselves if buyers regain control.
More Information in our Economic Calendar.
