Silver Price Forecast: XAG/USD hesitates at $36.00 with risk aversion easing

LONDON (June 23) Silver (XAG/USD) found a bottom near 35.50 following a reversal from multi-year highs at $37.30 last week, but the precious metal is struggling to find significant acceptance above $36.00 on Monday as the risk sentiment improved somewhat at the European session opening.

European bourses have opened with gains, except the UK FTSE100, and Wall Street futures are turning positive, despite ongoing fears about Iran’s retaliation to this weekend’s US attacks.

Iran’s army leaders have vowed severe consequences to the US, but so far, the response to the massive bombings of Iran’s key nuclear sites has been limited to missile strikes on Israel’s soil, sparing US interests in the region. This keeps hopes of avoiding a wider regional war alive for now, which is boosting equities and weighing on safe assets, such as silver.

XAG/USD: Potential Head & Shoulders formation

A view of the 4-hour charts, and we see a frail recovery from Friday’s lows at $35.50. The Relative Strength Index remains well into negative territory, suggesting that the bearish structure of the last three days is still in play, with previous support, at the $36.10 area (June 13, 16, and 17 highs), now acting as resistance.

Above here, the next resistance area is at the June 19 high at $36.82. A rejection here might form a bearish head & Shoulders, a potential topping pattern that would bring the focus back to the key $35.45-$35.50 area, June 12 and 20 lows, and the neckline of the H&S pattern.

A break of that level confirms that the bullish cycle from early May lows is over and that a deeper correction is in progress, with the next bearish targets at $34.10 (June 4 low) and the $32.70 area, which held prices on May 22, 27, 28, and 30.

FXStreet