Key Points:
- Despite gains, silver hasn’t shaken its technical bias.
- 100 day EMA remains bearish.
- Stronger hawkish tone from Yellen could help to encourage a downtrend.
Silver risks losing its post-FOMC gains in the coming session if it can’t shake off some of its bearish technical bias. Specifically, unlike gold, the metal needs to convincingly push through that 100 day EMA and invert its Parabolic SAR before we can begin to have any degree of certainty that yesterday’s freshly-made ground isn’t going to be ceded.
The first technical reading suggestive of a near-term decline is that aforementioned 100 day moving average. Quite clearly, silver prices have had some difficulty pushing beyond the 100 day EMA which comes as little surprise given the broadly bearish bias of the 12 and 20 day measures. As a result of this, market participants will be viewing the current zone of resistance as a near-term impasse which could herald a subsequent reversal.
Indeed, further losses would be in line with silver’s Parabolic SAR bias which remains stubbornly bearish. Whilst it is true that the reading is on the very cusp of inverting, the metal seems to be struggling to recruit enough support to make that final surge above the 38.2% Fibonacci level. However, unless this retracement is breached, chances of seeing that bias shift remain fairly slim.
What’s more, moving in step with the long-term bearish trend line is now looking more than reasonable given a conspicuous lack of support from the stochastic oscillator. Until the prior session, the highly oversold reading had been largely responsible for militating against downside risks. Now however, the oscillator is firmly neutral which leaves the bears rather well positioned to erode some of the recent gains.
Ultimately, if we do see a decline take hold again, losses could extend back to the 16.62 mark and beyond. Although, the presence of the 61.8% Fibonacci level around this price will likely provide a near-term cap on losses. Furthermore, the fundamental environment will be highly important as the metal moves towards this point so keep an eye on the news feed, especially for any hint of a slightly more hawkish tone from Yellen.