Silver Price Forecast: XAG/USD flat lines around $36.75 area; bullish potential seems intact

• Silver stalls the overnight pullback from a multi-year peak, though it lacks a firm intraday direction.

• The bullish technical setup suggests that the path of the least hurdle for the XAG/USD is to the upside.

• A convincing break and acceptance below the $36.00 mark is needed to negate the positive outlook.

Silver (XAG/USD) oscillates in a narrow range around the $36.75 area during the Asian session on Thursday and for now, seems to have stalled the previous day's modest pullback from its highest level since February 2012. Meanwhile, the technical setup favors bullish traders and suggests that the path of least resistance for the white metal is to the upside.

A sustained strength beyond the $36.45-$36.50 barrier confirmed a breakout through a short-term descending trend channel, which constituted the formation of a bullish flag pattern. Moreover, the Relative Strength Index (RSI) on the daily chart has also eased from overbought territory. This, along with positive oscillators, validates the near-term constructive outlook for the XAG/USD.

Hence, a subsequent move beyond the $37.00 round figure, towards retesting the multi-year high around the $37.30-$37.35 area touched on Wednesday, looks like a distinct possibility. Some follow-through buying beyond the mid-$37.00s, or the February 2012 high, should allow the XAG/USD to reclaim the $38.00 mark and climb toward the next relevant hurdle near the $38.50-$38.55 region.

On the flip side, the 50-period Simple Moving Average (SMA) on the 4-hour chart, near the $36.55 area, could lend some support ahead of the trend-channel breakpoint, currently around the $36.30 region. This is followed by the weekly low, around the $36.15 region, and the round figure. The latter should act as a key pivotal point, which if broken might shift the near-term bias in favor of bears.

Silver 4-hour chart