Silver Price Analysis: XAG/USD bounces off two-year low/ascending channel support

Silver witnessed selling for the fourth successive day on Thursday and dived to a nearly two-year low, around the $20.30 region during the early North American session.

The downward trajectory, however, stalled near the lower boundary of a downward sloping trend channel extending from the beginning of this month. The XAG/USD did attempt a minor recovery from the said support, though lacked any follow-through beyond the $20.70-$20.75 region.

Given the recent repeated failures to find acceptance above the 200-period SMA on the 4-hour chart, the descending channel supports prospects for further losses. The negative outlook is reinforced by bearish oscillators, which are still far from being in the oversold territory.

That said, bearish traders are likely to wait for a convincing break through the trend-channel support before placing fresh bets. The XAG/USD might then turn vulnerable to weaken further below the $20.00 psychological mark and test the next relevant support near the $19.60-$19.55 area.

On the flip side, any meaningful bounce could be seen as a selling opportunity and remain capped near the $21.00 mark. The said handle should act as a key pivotal point, which if cleared decisively might trigger a short-covering rally and lift the XAG/USD towards the $21.50 supply zone.

The latter marks a confluence barrier, comprising the top end of the ascending channel and the 200-period SMA on the 4-hour chart. Sustained strength beyond would negate any near-term negative bias and pave the way for some meaningful near-term upside for the XAG/USD.

Silver 4-hour chart

Key levels to watch