Is silver’s rally about to come to an end?
Check out this reversal pattern that’s forming on its 4-hour time frame!
The precious metal has yet to break below the neckline of the head and shoulders pattern, but make sure you keep close tabs on this near-term support zone.
Silver (XAG/USD) 4-hour Chart by TradingView
In our Global Market Recap, we discussed how concerns about “higher for longer” U.S. interest rates drove the dollar higher against risk assets late last week.
In particular, the advanced U.S. GDP reading highlighted the stagflation combo of weak growth and strong price pressures, followed by a higher-than-expected annual core PCE index on Friday.
These brought commodities, including silver, down to near-term support regions and paved the way for a shaky start this week.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on silver and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
XAG/USD is down to the neckline of its head and shoulders reversal formation, and a break lower could trigger a downtrend that’s at least the same height as the pattern.
If that happens, look out for a sustained bearish move to the next targets at S1 ($26.365) near the 200 SMA dynamic support, then S2 ($25.508) near a minor psychological mark, and S3 ($24.437) at the April lows.
Just be careful since the 100 SMA is still above the 200 SMA to reflect upside momentum. Then again, silver has fallen below the faster-moving 100 SMA as an early signal of the trend turning.
If support still holds, XAG/USD might set its sights back up on the resistance zones at R1 ($28.383) then R2 ($29.544) near the monthly highs.
We’ve got plenty of top-tier catalysts from the U.S. economy that could bring more volatility in the markets this week, so make sure you check ’em out!