Source: PaxForex Premium Analytics Portal, Fundamental Insight
All eyes are on the US Federal Reserve, where a growing number of economists and analysts predict a 75 basis point interest rate hike versus the 50 basis point increase communicated by the central bank. Inflation remains red-hot and appears to anchor itself for the long run. The US Federal Reserve lost all credibility after labeling inflation transitory last year, claiming it was related to Covid-19 related lockdowns. It failed again to realize it created inflation with its destructive monetary policy between 2009 and 2021, placing it behind the curve. The central bank has now to aggressively hike interest rates while the economy cools.
Despite the red flags, some believe a US recession is unlikely. The ignorance over reality and continued resilience to acknowledge the direction of the economy and inflation will result in ongoing policy mistakes. The US Federal Reserve is too little too late, making safe-haven assets like precious metals an attractive investment. The rising interest rate environment globally, where the ECB also fails to move on the interest rate front, placing it in the same boat with the US Federal Reserve, makes cash an asset class to consider. It will further harm economic activity, fuel the strengthening bear market, and deepen the recession.
Today’s US retail sales data for May could show that consumers remained resilient, dipping into savings to maintain lifestyles they cannot afford. The savings rate contracted to multi-decade lows, pension funds continue to lack funding, and the long-term problems for the debt-driven US economy magnify. Gold, silver, and cash could emerge as the most profitable 2022 asset classes as the rout in global equity markets shows signs of accelerating over the next few months. Following an official recession, a period of stagflation may follow, a reality most fail to consider, and markets have not priced in.
The forecast for the XAG/USD remains bullish after this precious metal recorded a higher low. Confirming the lack of bearish pressures are the Kijun-sen and the Tenkan-sen after both turned sideways. The Ichimoku Kinko Hyo Cloud also stabilized, and price action is likely to move through the cloud during its next ascent. Traders should monitor the CCI after this technical indicator has moved higher inside extreme oversold territory. A breakout above -100 could trigger the next rally in silver. Can bulls regain control of the XAG/USD and push price action into its horizontal resistance area?Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for Silver remain inside the or breakout above the 20.450 to 21.650 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 21.200
- Take Profit Zone: 23.300– 29.950
- Stop Loss Level: 19.650
Should price action for Silver breakdown below 20.450, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 19.650
- Take Profit Zone:18.350 – 18.950
- Stop Loss Level: 2.450
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