Current trend

Quotes of the XAG/USD pair continue the downward trend around 27.89. The instrument lags significantly behind its main competitor, gold, which remains close to historical highs.

The main reason for these dynamics is low demand: according to yesterday’s report from the Chicago Mercantile Exchange (CME Group Inc.), the average trading volume in silver futures this week is fixed at around 63.4 thousand positions compared to June figures, when it was more than 140.0 thousand positions, and the options position is only slightly larger than 13.0 thousand contracts. According to the US Commodity Futures Trading Commission (CFTC), in the producer category, sellers hold the advantage with 45.961 thousand positions, while buyers hold only 6.831 thousand contracts.

Another fundamental factor in the negative dynamics of silver quotations is the upward correction in the bond market and the start of the publication period of corporate reporting. Over the past week, the US 10-year yield has risen from 4.149% to 4.264%, and the stock market has seen wild swings in company share prices, causing a number of investors to move away from silver in favor of greater volatility. As a result, the precious metal is now less in demand, and new volumes should be expected only after the end of the period for publishing the financial results of the component companies of stock indices.

Support and resistance

On the daily chart, quotes began to implement the Head and Shoulders pattern, and have already overcome the Neck line at around 29.00.

Technical indicators reversed and issued a new sell signal: the EMA fluctuation range on the Alligator indicator began to expand in the downward direction, and the AO histogram forms new corrective bars, falling in the sales zone.

Support levels: 27.50, 26.00.

Resistance levels: 28.30, 29.80.

Trading tips

If the asset declines and the price consolidates below the support level at 27.50, short positions can be opened with the target at 26.00. Stop-loss — 28.50. Implementation time: 7 days and more.

If the asset continues to grow and consolidates above the resistance level of 28.30, buy positions with a target of 29.80 will be relevant. Stop-loss — 27.40.