Silver Price Forecast: XAG/USD stalls below $39.40 long-term highs amid higher appetite for risk

• Silver rally stalls on lower demand for safe-havens after the US-Japan deal.
• Optimism about the possibility of more trade agreements is weighing on demand for precious metals.
• XAG/USD is showing signs of exhaustion at long-term highs above $39.15.

Silver (XAG/USD) is trading within a tight range at multi-year highs above $39.15 in the early European session on Wednesday. The precious metal retains most of its previous gains, despite the brighter market mood following the US-Japan trade deal, although upside attempts remain capped below $39.40.

News of a trade agreement between the US and Japan, which has lowered tariffs on imports from the Asian country to 15% from the previous 25%, has lifted market sentiment on hopes that more such deals are possible before the August 1 deadline.

Technical Analysis: Signs of a weakening bullish momentum

The broader XAG/USD trend remains bullish, but technical indicators are starting to show signs of exhaustion. The 4-hour RSI has reached overbought levels, but more importantly, is featuring a bearish divergence that should act as a warning for buyers.

In this context, and considering the unfavourable fundamental background, a correction from current levels appears likely. Bears are now testing previous resistance, which has turned into support at $39,15 (Jul 14 highs). Further down, Tuesday's low, at $38.75 and the convergence of the reverse trendline, and July 18 lows, at $38.10, are the next potential targets.

On the upside, immediate resistance lies at the mentioned $39.40 Intra-day highs. Above here, the next target would be the 161.8% Fibonacci extension of the early July rally, at the $40.00 psychological area.