Silver Rebounds at Crucial Support Level, Bullish Pattern Emerges

Silver prices have staged a rebound at a key support level, forming a bullish hammer/dragonfly doji pattern that indicates a potential uptrend. The white metal hit its lowest level since early April, nearing the $26 mark, after being hit by profit-taking, a strong US dollar, and reduced rate cut bets. However, technical analysis suggests that XAG/USD could bounce back from the breakout area around the $25-26 zone.

Why this matters: The rebound in silver prices has significant implications for investors and the global economy, as it can impact the value of currencies and influence market trends. A sustained uptrend in silver prices could also lead to increased investment in precious metals, potentially affecting the demand for other assets.

The support level for silver is at $26.10, while the resistance level stands at $26.90. This pattern suggests that silver prices may be ready to make an upward move, with the support level serving as a floor and the resistance level acting as a ceiling. The formation of a bullish hammer/dragonfly doji pattern is a positive technical indicator, hinting at a possible reversal in the market trend.

Despite the recent pullback, precious metals, including gold and silver, remain in demand as years of high inflation chip away at the value of fiat currencies. Advocates for precious metals stress their recent resilience in the face of a strong dollar and rising bond yields. Fawad Razaqzada, Market Analyst at City Index, notes,"I reckon silver is going to find its feet again around these levels and expect to see more gains this year. "He also points out that"the grey metal has not even neared the highs of its most recent years around $30, let alone its record peak of near $50 that it had hit in 2011."

Silver's recent rally was fueled by a technical breakout above key resistance in the $25-26 area, which came to a halt a few weeks ago as prices got extremely overbought and the US dollar found renewed support. However, the big breakout in silver after a multi-year consolidation means traders will be happy to buy the dips. The Relative Strength Index (RSI) has worked off its extremely overbought conditions on multiple time frames and is now in the sweet spot of just above 50.0 on the weekly and monthly time frames.

The underlying strong trend of precious metals could lead to the next phase of the rally commencing this week following the recent pullback. The US monthly jobs report and the ISM services PMI, scheduled to be released at the end of the week, could impact the short-term trajectory of precious metals. Economists anticipate that US employers recruited 243,000 jobs, lower than the 303,000 additions registered in March. The Unemployment Rate is forecasted to have remained steady at 3.8%. The annual Average Hourly Earnings are expected to have grown at a slower pace of 4.0% from 4.1% in March, with steady 0.3% growth on a month-on-month basis.

The uncertainty over silver's near-term outlook deepens as it has slipped below the 20-period Exponential Moving Average (EMA), which trades around $27.20. The 14-period Relative Strength Index (RSI) slips into the 40.00-60.00 range, suggesting that the bullish momentum has faded. However, the long-term outlook remains stable, with the formation of a bullish hammer/dragonfly doji pattern indicating a potential uptrend.

Silver's rebound at the key $26.10 support level and the formation of a bullish hammer/dragonfly doji pattern offer a glimmer of hope for silver enthusiasts. The coming weeks will be pivotal in determining whether the white metal can regain its shine and initiate a sustained uptrend or if it will continue to face resistance in the near term as investors closely monitor key economic data and technical indicators to gauge silver's future trajectory.

Key Takeaways

• Silver prices rebound at $26 support level, forming a bullish hammer/dragonfly doji pattern.
• Technical analysis suggests a potential uptrend, with $26.10 as support and $26.90 as resistance.
• Precious metals remain in demand due to high inflation and fiat currency devaluation.
• Upcoming US jobs report and ISM services PMI could impact silver's short-term trajectory.
• Long-term outlook remains stable, with a potential uptrend indicated by the bullish pattern.