Silver Price Analysis: Establishes another lower low as downtrend extends

Silver (XAG/USD) trades almost 2.0% lower on Thursday after the release of US factory-gate inflation data.

The precious metal has broken below $29.04 (June 11 low) and thereby posted a lower low at $28.85, the low of the day. 

The sequence of lower lows and lower highs witnessed since the May highs suggests Silver is in a short-term downtrend, which given “the trend is your friend” is expected to extend. 

Silver 4-hour Chart 

A break below $28.85 (June 13 low) would confirm another lower low, continuing the bearish sequence. 

There is a chance Silver could fall to an initial target at $28.21, the 0.618 Fibonacci ratio of the height of the range that unfolded in the second half of May, extrapolated lower. This is the usual method used by technical analysts for establishing targets after breakouts from ranges.

The 50-day Simple Moving Average (SMA) at $28.93, however, could provide a barrier to further downside. 

That said, more bearishness could still see Silver reach as low as $27.19, the second target at the 100% extrapolation of the height of the range lower. 

The Relative Strength Index (RSI) is showing bullish convergence with price since the June 4 low. Although price has gone on to make progressively lower lows, RSI has not. The non-correlation indicates a lack of bearish momentum and increases the risk of Silver making a pullback or a recovery. 

It would take a close above $31.00 to bring the short-term downtrend into doubt. A move above the $31.55 lower high would suggest the possibility of a recovery to the range high at $32.51, and a reversal of the short-term trend too.