Silver Price Analysis: XAG/USD seems vulnerable to prolong its downward trajectory

• Silver dropped closer to a one-week-old trading range support on Thursday.
• The recent range-bound price action points to a bearish consolidation phase.
• RSI on the daily chart warrants some caution for aggressive bearish traders.

Silver edged lower for the second successive day on Thursday and dropped back closer to the lower end of its weekly trading range, around the $22.25-20 region during the mid-European session.

From a technical perspective, the recent range-bound price action witnessed over the past one week or so constitutes the formation of a rectangle. Given the recent sharp pullback from over three-month high touched in November, the rectangle could now be categorized as a bearish consolidation phase before the next leg down.

The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in the bearish territory. That said, RSI (14) on the mentioned chart is hovering near the oversold zone. This, in turn, warrants some caution for bearish traders ahead of the key US consumer inflation figures on Friday.

The technical set-up suggests that the XAG/USD is more likely to prolong its consolidative price move, though the bias remains tiled firmly in favour of bearish traders. Hence, any attempted recovery move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $22.60 supply zone.

A sustained strength beyond could prompt some near-term short-covering move and push the XAG/USD back towards the $23.00 mark. Some follow-through buying beyond the $23.15-20 region will negate the negative bias and pave the way for a further move up towards the $23.55-60 intermediate resistance en-route the $24.00 mark.

On the flip side, a convincing break below the trading range support, around the $22.20 region, will be seen as a fresh trigger for bearish traders. The XAG/USD might then turn vulnerable to break through the $22.00 mark and accelerate the fall towards challenge the YTD low, around the $21.40 region touched in September.

Silver 4-hour chart

Technical levels to watch