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Silver Shine Overshadowed by USD Strength

Silver Shine Overshadowed by USD Strength

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Silver (XAG/USD) Talking Points

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Silver Technical Analysis

Silver futures are trading at a critical juncture as the industrial metal lingers below 21.00. After rebounding off the 18.00 psychological level in mid-July, prices managed to push higher before facing the next big zone of resistance at 20.00.

On the monthly timeframe, the formation of a dragonfly doji was later accompanied by a bearish engulfing on the weekly chart driving the CCI into oversold territory. In technical analysis, the above-mentioned candlestick patterns are often indicative of a potential reversal that generally occurs after steep decline.

What is Silver? Understanding Silver as a Trader’s Commodity

Silver (XAG/USD) Monthly Chart

Chart prepared by Tammy Da Costa using TradingView

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Although aggressive rate hikes and a hawkish Federal Reserve have limited the upside move, USD strength has posed an additional threat for price action. With the greenback’s the reserve currency status enhancing its safe-haven appeal, silver bulls aren’t backing off anytime soon, bringing technical levels of support and resistance back into play.

From a daily standpoint, a rejection of the 78.6% retracement of the March to June move allowed bulls to find a comfortable level of support above the 20.00 mark. With the 20-day MA (moving average) providing an additional layer of support at 19.758, a break of 21.00 could draw focus back towards prior support turned resistance at 21.635.

Silver (XAG/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView

Silver Sentiment

Silver Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% 0% 1%
Weekly -10% 21% -5%
What does it mean for price action?
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At the time of writing, Retail trader data shows 88.53% of traders are net-long with the ratio of traders long to short at 7.72 to 1. The number of traders net-long is 0.16% lower than yesterday and 2.36% lower from last week, while the number of traders net-short is 42.77% higher than yesterday and 21.67% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Silver price trend may soon reverse higher despite the fact traders remain net-long.

--- Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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