Silver erases all Treasury-led gains as hawkish Warsh retightens financial conditions; focus turns to US CPI report

FUNDAMENTAL OVERVIEW Silver sold off on Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium. The key passage was him saying "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.This process has, of course, extended the corrections in the "debasement" trades, with silver returning to pre-US Treasury announcement levels. The rate hike probabilities for the September meeting have also increased, with the market now seeing roughly a 67% chance of a hike. Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% and deter the Fed from hiking at the upcoming meeting. If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message and ease financial conditions again.   SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that silver has erased completely the Treasury buyback announcement gains after Fed Chair Warsh retightened financial conditions with his hawkish speech. The price is now trading around the key 63.00 support zone. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into the 80.00 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 55.00 level next. SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can see more clearly the support zone around the 63.00 level. Again, this is where the buyers will likely step in, with the resistance around the 66.70 level as the first target. The sellers, on the other hand, will look for a break lower to extend the drop into new lows. SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we have a downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will look for a break to pile in for a rally into the 66.70 resistance next. The red lines define the average daily range for today.UPCOMING CATALYSTSToday, we get the US ADP report. Tomorrow, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report. This article was written by Giuseppe Dellamotta at investinglive.com.