On August 20, 2020, the silver markets gapped slightly and dropped off the bat. In the past, gaps get filled and it now appears like this space is trying to stabilize. The markets gapped to kick off the day’s session showing some signs of exhaustion.
Eventually, the market might see a lot of volatility but quite clearly with such an argument made for silver in the long term. The industrial metal’s proponents believe that it still has some room for an upside trend in the middle-term; as governments ease lockdowns that were put in place to stop the spread of the COVID-19 pandemic.
But, before the upside trend continues, a retest of the $26 zone is most likely. Silver might even drop to $25. That is a level that attracts attention from many silver traders. Many are watching it since it is the zone from which the market bounced previously.
US Dollar Rally Exerts Pressure On Silver
Silver dropped below $27.00 after the FOMC Minutes did not indicate that the Federal Reserve was ready to implement extra measures to boost inflation. The Fed also said that it was surprised by the current strength of household spending.
These interesting remarks were enough to offer serious support to the US dollar. Interestingly, the US Dollar Index has managed to surge above the resistance at the 93 level and continues its attempts to surge higher. The US Dollar Index measures the strength of the American currency against a wide basket of currencies.
Precious metals encountered massive pressure after the dollar’s rapid moves. Gold has dropped below $1,950 and it is currently attempting to settle below the 20 EMA. If that happens, gold is set to experience more downside pressure that would become bearish for silver.
In the meantime, the gold/silver ratio remained flat near 72 and it has stabilized there in recent trading sessions. This stability may indicate that the traders are trying to find a new balance after the steep downside move that happened in recent months.
Most probably, the dynamics of the US dollar will continue to play an integral role in the silver trading space in the upcoming trading sessions.
Silver is currently trying to regain the support near $27.00. If XAG/USD does not manage to remain near this level; it will move towards the next support level that has formed around $26.20.
If the industrial metal plunges below the $26.20 support; it will then head downwards to test the 20 EMA at $25.65. Any move below the 20 EMA might probably present a severe challenge for the silver bulls as it will indicate that silver has lost its upside momentum. In that case, silver will continue to drop heading towards the $24.95 support level.
On the upside, the nearest resistance has formed at $27.75. During today’s trading session, silver attempted to rise above that level but it encountered massive resistance near $27.50 and pulled back. If the metal manages to settle above $27.75, it will rise towards the next resistance zone that has formed near $28.50.
Experts believe that the current pullback is a normal market correction and the buyers are set to push silver back above $28.