Will Silver Prices (XAGUSD) Target $20 After Today’s Bearish Pennant Violation?
Risky sentiment in the financial markets lacked conviction this Thursday, allowing silver prices to weaken further amid some strength in the greenback. The recovery in silver prices is hinged on the recovery of manufacturing.
Data surrounding business conditions in manufacturing for October have generally been underwhelming. CBI Business Order Expectations data in the UK were disappointing, and this reinforced the unwillingness of traders to put their bets on the recovery of silver demand. This situation has allowed sellers to take the initiative once more, driving silver prices down by 1.62% as at writing.
Commerzbank analysts provided a route for silver prices to potentially target the $20 mark, where the 200-day moving average may serve as the dynamic support. Rising coronavirus cases all over the world and the lockdowns that come with them are a genuine concern for the manufacturing sector and may keep silver prices on the back foot for some time to come. This comes as the WHO is also warning that the availability of coronavirus vaccines does not necessarily mean that the virus will disappear overnight.
Technical Levels to Watch
Today’s violation of the bearish pennant’s lower border is a warning sign that things may go south as far as silver price activity on the XAGUSD daily chart is concerned. In yesterday’s outlook piece, we reiterated the view of Commerzbank analysts that saw silver prices going all the way to the $20 mark if the bearish pennant gave way. So far, the pennant has not given way. Sellers need to push for a 3% closing penetration below this border for this to happen. This would then set up the potential for a long ride towards $20 that has to depend on 23.164, 22.386 and 21.637 giving way to selling pressure.
On the flip side, a bounce that allows the price to continue the oscillation within the consolidation area could target 24.569, with 25.227 and 26.325 serving as additional targets to the north.
There is a pathway towards $20 for silver prices, but this is a long journey that only begins when sellers take out the bearish pennant’s lower edge.