Today’s Forex analysis will be on Silver! For those of you who did not know: the XAGUSD tripled in value within 8 months back in 2011. This article will examine whether a similar move could be expected again sometime soon. This is actually my first FX article on XAG because I promised a reader that I would take a look at the Silver currency and apply my FX trading advice on the precious metal… so here goes!
I want to ask you to let me know which currency + timeframe you would like to see analyzed in the rest of the week? It is really important for me to find out what Forex pairs you are interested in so would greatly appreciate a comment down below – many thanks! That way I will can my crystal ball technique for some good old Forex trade recommendations on the currencies of your choice 🙂
With no longer a due, here is my analysis on how to trade XAGUSD.
As shown in this week chart, the Silver currency has a tremendous move up. Let us analyze it:
1) It remained well under the value of $10 up to 2006;
2) The first climb above the psychological $10 level took 6 months and found resistance at $15;
3) After period of consolidation the next bull run saw XAG hit above the $20 in 2008;
4) After another sideways move, the commodity made its biggest bull run. XAGUSD tripled in value from $16/$17 all the way to $50 in an enormous bull run, as many of you probably remember very well. It did this achievement in only 8 months!
5) After that we saw a huge 3 wave correction to the downside;
6) After which XAGUSD went into a sideways range for the last 1,5 years, breaking the down trend line about half way.
The upper area of the sideways range is +/-$35, while the bottom level of the sideways range is around +/-$26. So what kind of Commodity movements can we expect in the future? How to trade the XAGUSD? How to trade this Commodity?
When looking at the same week chart but then zoomed in a bit, we are able to see price action more clearly.
Within this sideways range, we see that Silver made triple top after which XAGUSD has been moving down ever since. It has been doing so in very neat down trend channel and a move down all the way down to the bottom of the week range seems very likely. That in itself could be an interesting short-term trade opportunity but we would need to zoom into the day chart for more clues on that.
From a bigger perspective however, we see that that the XAG is close to hitting the bottom of the week range very soon. Will this level provide support or will the currency break?
In my opinion, a bottom of such importance with 3 hits already “under the belt” should usually provide support. A bounce from this area is therefore very likely.
Whether the down trend will continue or whether the XAG bounce off the range is the big question. In theory one of the two scenarios will unfold:
1) a bounce of the bottom and a move back to the top of the sideways range is possible;
2) a break of the bottom and a continuation of the down move is the 2nd option.
The answer to that question is highly dependent on the nature of price action at that point in time. So that is something I will monitor live and I will give live Forex updates via these articles but also via our twitter account @winnersedgetrad.
I do have a slight biased for the downside break. Gold has a similar bottom in place at around $1500-1550. I would not be surprised to see a break of the bigger bottoms on both currency pairs to hunt for some stop losses before the commodity pairs move up again.
This of course is just a hunch. More importantly is how the price action responds to the $26 levels. Will we see a bullish move up or a corrective type of movement? This will be key.
On the 2nd week chart here above the trader is able to see the zones where I am bullish, bearish and neutral.
On the day chart we can see the break of the huge sideways consolidation zone, not surprisingly to the downside. What rests is a hook back to the broken bottom for one more move down to the bottom of the weekly sideways range. That is a trade worth waiting for and it could materialize when/if XAG bounces off the 886 retracement level to the upside. The target is obviously quadruple bottom and the -618 & -1000 targets at $26.
Thanks for reading everyone! Hope you enjoyed the free Forex advice and the “Commodity training session” 🙂 Don’t forget to drop a note here with your favo time frame and currency!
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