XAGUSD: Silver Prices Consolidate As Coronavirus Outbreak Continues
Silver price continues to trade sideways as the markets grapple with the impact of the coronavirus outbreak. The Chinese CPI data (annualized) came in at 5.4%, which was better than the 4.9% that the markets had predicted, and was also better than the 4.5% registered previously. While this led to a marginal recovery on the Yuan against the US Dollar, it has not averted the risk-averse sentiment that has helped keep the silver price activity in a bullish trend for some time now.
Foreign companies in China continue to shut down even as videos of harsher government-enforced quarantine measures appear online. Demand worries, as well as lack of convincing buying interest, continue to keep the XAGUSD in a side trend, where it currently trades in the middle of a flag consolidation pattern at 17.8205.
Silver price continues to remain in a long term uptrend (as seen on the monthly chart), with the current upside limited by the bullish flag consolidation area. Within the flag, a symmetrical triangle has started to form. The breakout of silver price from this flag will determine which of the flag borders will become a target.
Two scenarios exist. The first is that there could be a bearish break from the triangle which then targets the lower flag border at the 17.18326 price level where a cluster of highs was found in November and early December 2019. From there, silver may continue to trade within the flag consolidation towards the upper border until the pattern resolves. If the pattern breaks down to the downside, distant targets at 16.80485 and 16.58888 lie in wait to challenge the downside break.
The second scenario could see the triangle broken to the upside, which takes silver price towards the upper flag boundary at 18.14680 (recent highs of 16-18 January 2020). Further upside push breaks the pattern according to technical expectations, which leads to a continuation of the uptrend, targeting 18.65367. The 3 September 2019 high at 19.27328 is another potential upside target. Attainment of this target completes the breakout’s measured move from the flag.