The Silver price suffered huge losses as soon as the market opened on Sunday. However, XAGUSD is attempting to recover. But can the recovery last?
XAGUSD came under pressure from the get-go as a wave of selling gripped precious metals. As soon as the bell rung, around $4 billion of gold futures were sold, forcing the silver price to its lowest level since November 2020.
In the first 10 minutes of trading, silver crashed 8.7%, falling as low as $22.20. However, a fightback is underway, and in the last three hours, XAGUSD has recovered 7.5% to $23.88, clawing back most of the early loss.
Similar to gold, there was no immediate catalyst for the drop. This appears to be a continuation of Friday’s weakness following the strong employment data In the US, made worse by the weekend’s low trading volumes.
In July, the US added 943,000 jobs, more than the expected 870,000. Furthermore, June’s figure was revised higher by 20,000. As a result, the unemployment rate declined to 5.4% from 5.9% in June.
As a result, 10 yields spiked above 1.30, putting a bid under the dollar and sending gold and silver materially lower.
The question is, what happens later today when the US traders digest the overnight price action? Will sellers take advantage of the bounce?
XAGUSD technical outlook
The daily chart highlights the scale of last nights collapse. The silver price is below the key 50, 100 and 200-day moving averages. Furthermore, the 50-day at $26.15 has crossed below the 100 at $26.23.
However, unlike gold, the 50 DMA is still above the 200. Although should the weakness persist, this will likely happen soon.
Support is seen at the September 2020 low of $21.66, and a failure to hold this level targets the 2019 high at $19.65.
Although, the Relative Strength Index got as low as 11.71 earlier and is a likely catalyst for the short-covering rally we have seen in the last couple of hours. However, it remains to be seen whether the buying momentum is sustainable or a dead cat bounce that sellers will take advantage of later.
Despite the bounce, the outlook is negative and will remain if the price is below the 200 DMA. But if the price clears at $25.92, the outlook turns increasingly positive.
Silver price chart (Daily)
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