Silver built on its recovery from a near two-year low touched last week and gained positive traction for the third successive day on Tuesday. The momentum pushed spot prices to a four-day high, around the $21.85 area during the first half of the European session, though lacked follow-through.
The intraday uptick stalled near the 50% Fibonacci retracement level of the $23.24-$20.46 downfall and should act as a pivotal point for intraday traders. Any subsequent move up, however, is likely to confront stiff resistance near the $22.00 mark, representing the top end of an ascending channel.
Given the recent sharp decline, the aforementioned trend channel constitutes the formation of a bearish flag pattern. Moreover, technical indicators on the daily chart are still holding deep in the negative territory, suggesting that the attempted recovery runs the risk of fizzling out rather quickly.
That said, a convincing break through the $22.00 mark would negate the bearish outlook and trigger a fresh bout of a short-covering rally. The XAG/USD might then surpass the 61.8% Fibo. level, around the $22.20 region and accelerate the momentum to the next relevant hurdle near the $22.55 area.
On the flip side, the 38.2% Fibo. level, around the $21.50 zone, now seems to protect the immediate downside. This is closely followed by the ascending trend-channel support, near the $21.35 region, which if broken decisively will reaffirm the bearish bias and pave the way for further losses.
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