Silver Outlook – Short Positions Rise as Silver Approaches Strong Resistance

Investors keep to see how the FOMC Chair Mr. Jerome Powell in his statement will forecast the progress of the economic recovery of the US and see if the inflation is held below 2% as expected. Although there are no doubts that the Fed Interest Rate decision will remain unchanged, the inflation data is what investors see as their pinpoint.

It is expected that Core Retail Sales and Retail Sales data as per February will slip heavily related to the January, which might ease the fear of hiking inflation. Although the inflation currently is slightly above the planned 2%, Mr. Powell in the FED’s January statement pointed out that the central bank will allow inflation to stay above the 2% for some time to stabilize the economy and keep the interest rate unchanged.

Silver once again outperformed Gold today by gains, Silver is up just over 1%, while Gold gained only 0.24%. According to the CFTC data as of March 9, there is a 20,000 spread between the overall net positions on Silver Futures, with an edge going to short positions. The update of the CFTC data on Silver will be released later tomorrow, worth checking it out.

As per the technicals, silver seems bearish below the ascending channel, the retest of the channel’s dynamic support as resistance, on March 11 adds fuel to the bearish sentiment of XAG/USD.

Although Silver might look ascending in a short uptrend, supported by a signal from MACD, MA100 and MA200 act as a strong resistance lying right next to the dynamic level which acted as a strong resistance previously, there is a key level and a pattern which might halt the uptrend for a longer period.

A falling wedge pattern formed on a 4H XAG/USD chart suggests that there should be one more leg down before Silver could regain power and continue upwards. There is a strong resistance at levels $26.60 and $26.75, which should be tested soon enough, the area of this resistance’s strong repulsing force is backed by multiple static resistance points, upper edge of the wedge pattern and the upper edge of the local ascending channel.

If Silver is not able to break and close above $26.75 and is rejected by this resistance area, the sharp fall may send it back to $24.90 and $24.35. If Silver is able to close above $26.75, then it might signal the bullish continuation of the precious metal, however the first scenario looks more relevant based on the chart analysis and the data from CFTC.