Silver Price Analysis: XAG/USD flirts with session lows, 100-DMA continues to cap

• Silver witnessed some selling on Tuesday and erased the previous day’s modest gains.
• A mixed technical setup warrants some caution before placing aggressive directional bets.

Silver dropped to fresh daily lows, around the $24.25 region during the first half of the European session, reversing the previous day's positive move.

Despite the pullback, the XAG/USD, so far, has managed to defend the 38.2% Fibonacci level of the $28.75-$21.42 downfall. The comes on the back of the recent sustained strength beyond a short-term descending trend-line resistance and an inverted head and shoulders bullish breakout. The set-up supports prospects for an extension of an upward trajectory witnessed over the past one month or so.

That said, last week's turnaround from an intermediate hurdle near the $24.80-85 region and the commodity's inability to find acceptance above the 100-day SMA warrants caution for bullish traders. The emergence of fresh selling on Tuesday further makes it prudent to wait for a strong follow-through buying before positioning for any further appreciating move amid absent fundamental catalysts.

From current levels, any further decline might continue to find decent support and attract some buying near the $24.00 mark, which now seems to act as a strong base for the XAG/USD. A convincing break below might accelerate the corrective slide towards mid-$23.00s. This is followed by the $23.20-15 confluence support, comprising of the descending trend-line breakpoint and the 23.6% Fibo. level.

On the flip side, the $24.50-60 region (100-day SMA) now seems to have emerged as an immediate strong hurdle. This is followed by the monthly swing highs, around the $24.80-85 region, above which the XAG/USD seems all set to reclaim the key $25.00 psychological mark. The latter coincides with the 50% Fibo. level, which if cleared decisively should pave the way for additional near-term gains.

Silver daily chart

Technical levels to watch