Silver price is rebounding above $17 after the survey of manufacturing activity in the Philadelphia region contracted in December. XAUUSD was able to gain upside momentum after the Philly Fed Manufacturing Index dropped to 0.3, which was far lower than the 8.1 the markets expected and a steep fall from the 10.4 recorded in the last release.
The business activity in Philadelphia’s manufacturing sector contracted heavily, according to the manufacturing survey conducted by the Philadelphia Federal Reserve Bank. This figure has therefore revived concerns that the manufacturing sector in the US has slowed down considerably.
After trading at the bottom end of the falling wedge formation, silver price as encapsulated in the XAGUSD is now trading at the upper border of the wedge, slightly above the $17 mark. At this price area, silver price will encounter resistance also being posed by previous lows of Aug 23 and Oct 1.
A break of this horizontal resistance takes silver price action above the falling wedge. However, there must be two successive daily candle closes above the upper border to confirm the breakout, even though it is possible a pullback to the broken wedge border could occur. This breakout move could open the door for price to target the immediate resistance at 17.4871 (previous lows of 18 Sep and 24 Oct, as well as previous high of Aug 13. Further upside could bring the resistance levels at 18.1053 and 18.6536 into focus.
On the flip side, a failed break of the upper border of the wedge could see silver price action return to the opposing border where it will test the 16.5888 support line. A break below this line invalidates the wedge and targets new support at 16.1572.