The short-term downtrend in the silver futures contract traded on the Multi Commodity Exchange (MCX) seems to have halted. The contract shows signs of reversal as it has been getting strong support from a trendline at ₹36,500/kg since last week.

After recording a low of ₹36,450 on Thursday, the contract has reversed higher. It is currently trading near ₹36,950. There is no immediate danger for the contract as long as it trades above ₹36,500. A fresh rally to test the next resistance at ₹37,725 looks likely in the coming days. A strong break above this hurdle can take the contract further higher to the next target of ₹38,700.

Short-term traders can go long with a stop-loss at ₹36,250 and for the target of ₹38,250.

The rupee has closed on a weak note on Tuesday at 64.25 against the dollar and is expected to remain weak in the coming days. Weak domestic currency could help in limiting the downside for the futures contract.

However, the bullish outlook will get negated if the contract decisively declines below ₹36,500 levels, on the back of a sharp fall in the global silver price. Then next target will be ₹35,900 which is a very important support level for the contract.

A strong break below this support can drag the contract further lower to ₹35,300 and ₹35,000. On the global front, the outlook for the spot silver ($16/oz) is unclear. The price is stuck inside a narrow range between $15.75 and $16.25. Market could be waiting for the outcome of the US Federal Reserve meeting on Wednesday, which could set the next trend for the global silver price.

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