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CMX Silver: US Rate Hike Could Extend into Next Year, Retailers Clearing Inventories Report Strong Performance in the Second Quarter
Summary:
In response to lower-than-expected CPI data, the Fed officials indicated that they would not waver from the Fed's plans to raise interest rates this year and next year. There are officials forecasting that US inflation could well exceed the 2% target and forecasting that the target range for the federal funds rate will rise from the current 2.25%-2.5% to 3.25%-3.5% and to 3.75%-4% by the end of 2023. On the other hand, low-income consumers rushed to discount stores in the second quarter, resulting in the strong performance of the stores. The market's focus for retailers will depend on inventory. Some retail businesses once indicated that excess inventory in the second quarter would be cleared by July, while clearance is expected to occur with a higher probability in the third quarter.
CLOSED
19.915
Opening Price
19.590
TP
20.260
SL
21.148 +0.158 +0.75%
325
Point
Profit
19.590
TP
19.583
Closing Price
19.915
Opening Price
20.260
SL
Fundamentals
In response to lower-than-expected CPI data, the Fed officials indicated that they would not waver from the Fed's plans to raise interest rates this year and next year.
The most dovish Fed official before the outbreak of the pandemic, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said Wednesday that the benchmark interest rate would be raised to 3.9% by the end of this year and 4.4 % by the end of 2023. He stated that "I am still maintaining my original forecast for the benchmark interest rate, and nothing is going to make me change that forecast."
The latest US data was released, with the CPI increasing by 8.5% year-on-year in July, lower than the previous month's 9.1% and also below economists' expectations.
Another Fed official stated that "the level of inflation remains unacceptably high. We expect to continue to raise rates for the remainder of this year and next year to ensure that inflation returns to our 2% target."
Recently, some investors have lowered their expectations for the Fed to continue raising interest rates by 75 basis points in September as inflation data was lower than market expectations. However, Fed official Kashkari said that conclusions about the Fed starting to cut rates early next year are unrealistic as inflation could be significantly above the 2% target by then. He also predicted that the target range for the federal funds rate will rise from the current 2.25%-2.5% to 3.25%-3.5% and to 3.75%-4% by the end of 2023.
On the other hand, large retailers such as Walmart released their financial reports on 16 August EST, and financial reports from retailers can enable investors to be certain about the overall situation of consumers.
Low-income consumers rushed to discount stores in the second quarter, resulting in the strong performance of the stores. The market's focus for retailers will depend on inventory. Some retail businesses indicated that excess inventory in the second quarter would be cleared by July, while clearance is expected to occur with a higher probability in the third quarter.
As a result, it can be deduced that the US retail sales data month-on-month in July will be better than market expectations in this afternoon session. And in the medium term, this US interest rate hike will extend into next year.
Technical Analysis
2.1 CMX Silver Monthly Chart
The CMX Silver is oscillating and consolidating between the range of 21.09 to 17.926. The price broke above the descending trend line since 31 May 2022 and is testing that trend line. According to the Elliott Wave Theory, this is the second sub-wave of the upward wave in the range, with the direction to go short.
MACD: two lines are in the bearish range; two lines form a death cross and intersect with the bar, indicating that the bears are gaining momentum.
Short-buyers: in the bearish range mainly, with enhanced strength of the bears.
CCL: the bulls reduce their positions.
Fast and slow trend lines: move down; the upper shadow of the candlestick this month rallies to test the key resistance level above, at 21.66.
2.2 CMX Silver Weekly Chart
This week will record a bearish engulfing pattern at the top of the range, signaling the formation of a phased top.
The price has broken below the key support level of 20.26, so the direction for CMX Silver this week is confirmed to be bearish with a pullback in the range.
2.3 CMX Silver Daily Chart
There is a bearish candlestick combination at the top of the range, with the ascending trendline below; the %K and %D form a death cross, and the CCL indicates that the bears are gaining momentum; the price has broken below the key support level at 20.145; therefore, it is highly probable that the price will break the trend during the session. The price fell below the ascending trend line, with three consecutive sessions of bear candles recorded, signaling the strong bears at the top of the range.
MACD: two lines are about to form a death cross.
KD: form a death cross in the overbought territory, with sufficient room to fall.
2.4 CMX Silver Hourly Chart
The candlestick is running along the descending trend line, forming a three-wave pattern. The current position of the price is at the third sub-wave, with a bearish direction.
The moving average (MA) below is around 19.62, a key support level during the session.
On the other hand, the MACD two lines form a death cross around the zero axis and intersect with the bar, indicating that the bears are gaining momentum. The short buyers are in the first range, and the momentum is expanding, signaling that the bears will buy during the session.
In summary: the bears of CMX Silver continue to buy during the session. It is recommended to go short at highs and focus on the key support level below, at 19.62.
It is recommended to go short at highs on CMX Silver.
Entry price: 19.915
Take profit: 19.590
Stop loss: 20.260
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