Silver Price Analysis: XAG/USD flirts with descending channel resistance, just below mid-$18.00s

Silver prolongs its recent bounce from the $17.55 area, or the lowest level since July 2020 set last week and gains traction for the third straight day on Tuesday. The momentum lifts the white metal to a multi-day high, around the $18.45 region during the early part of the European session.

The XAG/USD is currently flirting with a resistance marked by the top boundary of a downward sloping channel extending from the August monthly swing high. Sustained strength beyond will be seen as a fresh trigger for bullish traders and pave the way for an extension of the ongoing recovery move, however, this is not a given.

Assuming the short-covering rally extends it has the potential to lift the XAG/USD towards the next relevant hurdle, just ahead of the $19.00 round figure. The latter coincides with the 100-period SMA on the 4-hour chart, which if cleared will reaffirm that spot prices have bottomed out in the near term.

The momentum could then get extended towards the 200-period SMA on the 4-hour chart, currently pegged near the $19.40-$19.45 region. Some follow-through buying beyond the $19.65 horizontal support breakpoint, turned resistance, should allow bulls to reclaim the $20.00 psychological mark.

On the flip side, any meaningful pullback now seems to find some support near the $18.25-$18.20 region ahead of the $18.00 round figure. Failure to defend the said support levels will suggest that the corrective rebound has run out of steam and shift the bias back in favour of bearish traders. The fact the recovery from the September 1 low has been relatively weak when compared to the prior leg down in August reduces the chances it will sustain. 

If the down trend reasserts itself the XAG/USD might further accelerate the fall back towards the YTD low, around the $17.55 region touched last Thursday en-route the ascending channel support, around the $17.00 round-figure mark.

Silver 4-hour chart

Key levels to watch