Silver stays well supported above $26.00, still stuck within bearish flag

• Spot silver has remained well supported above the $26.00 level on Friday.
• XAG/USD has been consolidating with a bearish flag these past few weeks, implying a bearish breakout is very possible.

Spot silver prices (XAG/USD) have been nudging higher on the final trading day of the week and have, for the most part, remained well supported above the $26.00 level in recent hours. On the day, its looks as though spot silver is going to close about 0.6% or just over 15 cents higher, meaning that on the week it will have gained about 1.2% or around 30 cents.

Importantly, from a technical standpoint at least, this week’s price action has confirmed that spot silver is consolidating within a bearish flag; to the upside, an uptrend linking the 4, 11 and 18 March highs has been constraining the price action, whilst to the downside, an uptrend linking the 5, 12, 18 and 19 March lows has been supporting the price action. Typically such structures occur when an asset is consolidating following recent losses, with a break to the downside of the flag acting as the sell signal for further downside – such a sell signal could be triggered by a break below the $26.00 area and could open the door to a drop all the way back towards the monthly lows in the $25.00s.

Driving the day

US government bond yields are a little lower on the day and the US dollar is flat with the Dollar Index (DXY) back below the 92.00 level after a very brief trip as high as the 92.10s. Thus, there has not been a great deal of cross-asset impetus for precious metals markets to trade off of.

The most notable news of the day was the Fed’s decision not to extend pandemic-era supplementary leverage ratio (SLR) rules at the end of the month – these rules had allowed banks to hold US treasuries and deposits on their balance sheets exempt from normal capital ratio requirements, a ruling the Fed decided upon in the early stages of the Covid-19 crisis order to stem excessive selling pressure in US treasury markets. The SLR rules will expire at the end of the month. While the news spurred fleeting upside in the dollar and yields, the move was short-lived and never weighed too heavily on precious metals.

Looking ahead, US/China headlines and the usual updates from OECD nations regarding the state of the global pandemic will be worth watching, but as traders head for the exit ahead of the weekend, silver is most likely to remain subdued into the close.

XAG/USD four hour chart