- Summary:
- Silver price trades lower on the day as US Industrial Production falls by the largest amount in nearly 74 years. The XAGUSD shows a rising wedge.
It was an all-round sectorial bloodbath as US Industrial Production declined by 5.4%, which was more significant than the market consensus of -4.1% and enough to halt silver price recovery for the week. US Industrial Production was also readjusted lower to 0.5% last month, but today’s 5.4% drop represents the largest drop since 1946.
Virtually all sectors measured by this index were affected, with manufacturing experiencing a record 6.3% fall, double what was expected for that sector. Mining fell 2%, while utilities fell 3.9%.
Silver price reflects the state of the manufacturing and industrial production, being a metal used for many industrial and pharmaceutical processes. Today’s 2.54% drop in silver price as reflected on the XAGUSD chart has allowed for a technical setup that looks pretty interesting.
Download our Q2 Market Global Market Outlook
Technical Outlook for Silver Price
The XAGUSD daily chart shows that the price action of the last few weeks has formed a rising wedge pattern. Today’s bearish price action follows a price rejection at the 15.80160 price level, which serves as the price tops for the candles of yesterday as well as that of March 13. This price level also intersects the upper border of the rising wedge pattern.
The daily candle has now found support at the lower wedge border, very close to where the 50% Fibonacci retracement level from the swing high of February 24 to the swing low of March 18 is located (15.25923).
A breakdown of the wedge that leads to the resumption of the short-term downtrend is the expected resolution of this pattern. If this plays out, then we can expect silver price action to aim for downside targets at 15.00492 (April 6 low) as well as the 38.2% Fibonacci price level of 14.39835. This should complete the price projection from the wedge breakdown area.
On the flip side, a bounce from the wedge’s lower border which takes it above the upper boundary and towards 16.15726 puts the probability of a downward resolution in jeopardy. Further advance towards 16.58888 invalidates the pattern. This price level is the site of multi-month support-resistance flips, and break of this area turns it into a support level on which further advance towards 17.34578 can be predicated.