Is Silver’s Rally Running Short on Momentum?

Key Points:

• Silver prices could be about to hit a near-term peak.

• Overarching technical bias remains rather bearish despite the recent rally.

• We could sink back below the 17.000 handle during the subsequent decline.

Silver prices have been recovering strongly over the past few sessions and have now reached the near-term peak that was forecasted for the metal a short while ago. However, given the fact that Trump is on the loose internationally and calls for his impeachment remain fresh, we may have to delve back into the technical forecast to ensure a revision of our expectations is not warranted just yet.

Firstly, it is relatively clear on the below chart that buying pressure is about to face some notable technical hurdles in the coming days, despite the apparent underlying shift in sentiment for silver. In particular, the presence of the 38.2% Fibonacci level and a historical zone of resistance around the 17.224 handle will be giving the bulls pause for thought which is in line with our earlier forecasts.

However, something that wasn’t clear last time was just where the 100 day EMA would be situated and what role it might play in capping upside potential. At the movement, we actually have a little more room to move before this average begins to seriously exert some selling pressure on the metal. As a result, we may see some more bullish momentum moving ahead that could mean gains extend up to around the 17.400 handle.

Nevertheless, despite the apparent need for an upward revision of our near-term high, we still expect to see the metal enter a bearish phase within a week or so. This is largely due to the overall configuration of the EMA’s which remains highly bearish. However, the stochastics also shouldn’t be ignored as they are deeply overbought as a result of the past few sessions of strong buying activity.

From a more fundamental perspective, Trump’s international engagements and the fallout from the Russian investigation are generally expected to generate some negative market sentiment this week. This will almost certainly buoy silver prices which would be in line with the upwards revision of our near-term high but it might also work against the subsequently forecasted slide. As a result, keep half an eye on the news feed as Trump’s antics may slow silver potential decline to a crawl.

Ultimately, whilst we might see a bit more buying coming down the line, we are still expecting to hit a near-term peak for silver prices in the coming week or so. Additionally, we expect to see the metal move into decline fairly shortly after –even with Trump posing a bit of threat to this forecast.