Silver Price Analysis: XAG/USD eases from over two-month top, bullish potential intact

NEW YORK (July 20) Silver retreats from its highest level since May 11, around the $25.25 region touched this Thursday and drops to a fresh daily low during the early European session. The white metal, however, manages to hold above the $25.00 psychological mark and seems poised to prolong its recent upward trajectory witnessed over the past month or so.

Last week's sustained breakout through the $24.50-$24.60 static barrier, which coincided with the 61.8% Fibonacci retracement level of the May-June downfall validates the positive outlook for the XAG/USD. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for Silver is to the upside and supports prospects for a further near-term appreciating move.

From current levels, any subsequent slide below the $25.00 mark is more likely to attract fresh buyers near the $24.75 region, which is followed by the weekly low, around the $24.60 area. The latter coincides with a key resistance breakpoint, now turned support, and should act as a strong base for the XAG/USD. That said, some follow-through selling could drag Silver further towards the $24.00 round figure en route to the $23.65-$23.60 support zone and the $23.20-$23.15 region.

A convincing break below the $23.00 round figure is needed to negate the positive outlook and shift the bias in favour of bearish traders.

On the flip side, the daily swing high, around the $25.25 area, might now act as an immediate hurdle ahead of the $25.50-$25.55 region, above which the XAG/USD might aim to reclaim the $26.00 round figure. Bulls might then aim to challenge the YTD peak, around the $26.10-$26.15 area touched in May. Some follow-through buying will set the stage for an extension of the recent goodish rebound from the vicinity of the $22.00 mark, or a three-month low touched in June.

FXStreet