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Market review

from 22 to 26 May
Artem Alekseev Аналитик «Olymp Trade»
Artem Alekseev
Аналитик «Olymp Trade»

Fundamentals

Monday, May 15, 2017 Italy’s consumer price index was published at 8:00 am GMT at the beginning of the week. It was 0.4% on a monthly basis.
Also, at 10:45 pm GMT the change in New Zealand’s retail sales, an indicator of consumer activity, was published. The number was 1.5%. This provided a little support to the national currency, which added 9 points over an hour.
The change in industrial output in China was published. The change in industrial output in the Heavenly Kingdom shrank to 6.5% versus a forecast of 7%.
Tuesday, May 16, 2017 The UK consumer price index came out yesterday. Prices grew at a rate of 0.5% relative to the previous period (2.7% on an annual basis).
Also, the number of new construction permits in the United States was published at 12:30 pm GMT on Tuesday. The number was worse than expected, 1,229,000 versus the predicted 1,270,000.
Wednesday, May 17, 2017 On Wednesday traders were watching for news on the change in the number of jobless claims in the UK. The number of claims grew substantially compared to the forecast – 19,400 versus 7,500.
This number had a positive effect on Britain’s pound sterling.
Also on Wednesday, as usual, data on US crude oil and refinery product inventories were published. The data showed a contraction by 1.753 million barrels, which had a positive impact on the cost of the black gold.
Thursday, May 18, 2017 Jobless claims data in Australia and the United States were published on Thursday. At 5.7%, unemployment in Australia fell slightly compared to the forecast of 5.9%.
The number of initial jobless claims in the United States dropped to 232,000, which is 4,000 claims fewer than the previous number. The change in retail sales inclusive of fuel costs also came out Thursday at 8:30 am GMT.
Friday, May 19, 2017 On Friday, traders’ attention was glued to Canada’s consumer price index. The CPI was 1.6% on an annual basis, slightly worse than expected.

Stocks

Monday, May 15, 2017 Apple stock continued its steady growth on Monday against all odds.
By the beginning of the week Russia’s MICEX Index had barely budged over the day, closing at 2003.12.
Tuesday, May 16, 2017 On Tuesday, The Home Depot, the world’s largest building materials chain, whose stock is traded on the NYSE, issued its report. The company’s numbers were not bad: Its assets grew by about US$ 1 billion. The company’s per-share profit, at $1.67, beat the forecast of $1.62. On these numbers, the company’s shares rose in value, forming a gap at the opening of trading. Indeed, the gap was later successfully closed by a gap down as early as the 17th
Wednesday, May 17, 2017 On Wednesday, May 17, 2017, the US stock market gapped down by more than 100 points, opening at 20,846.17 points. The industrial index therefore closed the April 25, 2017 gap.
Thursday, May 18, 2017 Wal-mart Stores came out with a very good report on Thursday, with $1 profit per share. On the report the company’s shares, which are traded on the NYSE, gapped up, adding 150 points yesterday at the opening.
The Russian stock market sank yesterday, closing 20 points below the opening level. The index is now in a fairly wide corridor at 1925 – 2050 points.
Friday, May 19, 2017 The DJIA reversed, closing second gap from April 24, 2017. We might soon see a technical bounce up to 20750.

Commodities

Gold and oil
Gold is still serving as a safe harbor, but without any particular demand from investors. Despite the recent rise this week and the breakthrough of the $1263 mark, it is still trading in a moderately green zone, a little above $1250/oz.
In general, next week traders will be focusing on news from the United States, since several important indicators that will help explain the current economic trend will be published. To judge from forecasts, the outlook for many indicators is negative and, given the scandals in the United States, this might push gold up further next week.
Wednesday evening, when FOMC minutes are published, merits special attention. It’s likely that this will provide a little new information about when the FRS might raise the rate the next time.
This week, oil managed to leave red territory and go green amid a number of key events. They include the cabinet-level agreement between Russia and Saudi Arabia, which extended terms for cutting and maintaining oil production at the same level until March 2018. The fact that the Vienna meeting of OPEC members and others who acceded to the agreement is approaching is also crucial here. The situation will be resolved on May 25, but there is every reason to believe that the OPEC+ agreement will be extended. The only question is whether the quota will change or stay the same.
The situation is clouded by US behavior, with an oil policy that is encouraging an increase in the number of drilling rigs: the number rose again last week, reaching the 712 mark. Technically, this means that 9 fewer drilling rigs were closed than were opened. This is again an alarm signal that oil overproduction might start increasing next week, unrestrained by verbal interventions from OPEC+ agreement participants.
On Friday, the spotlight should be on Baker Hughes’s evening number, since it will signal the direction of the near-term trend for oil. The decline in oil inventories shrank, which also may adversely affect oil prices next week, at least until the Vienna meeting.

Technical analysis of basic assets:

    EUR/USD: 2.42%

    CAD/JPY: -0.74%

    USD/JPY: -1.74%

    USD/CAD : -1.00%

    EUR/JPY: 0.63%

    GBP/USD : 1.00%

    EUR/GBP: 1.39%

    USD/CHF: -2.61%

    AUD/USD: 0.88%

    AUD/JPY: -0.87%

    GBP/JPY: -0.75%

    CHF/JPY: 0.89%

    EUR/CAD: 1.39%

    AUD/CAD: -0.12%

    NZD/JPY: -1.05%

    NZD/USD: 0.70%

    AUD/NZD: 0.20%

    GBP/AUD: 0.12%

    EUR/AUD: 1.51%

    EUR/CHF: -0.26%

    GBP/CHF: -1.63%

    EUR/NZD: 1.71%

    AUD/CHF: -1.77%

    GBP/NZD: 0.30%

    GBP/CAD: -0.01%

    BTC/USD: 15.16%

    USD/RUB: -0.18%

    USD/SGD: -1.37%

Технический анализ по основным активам:

EUR/USD

The USD did not hold. The bulls successfully overcame the resistance at 1.1000. If they can consolidate higher, the next meaningful level will be 1.1200 (1.1230), where a 78.6% Fibo correction is located.
Analyzing the pair on the weekly charts, we see that the euro has gone past the upper Bollinger band, taking a stroll along the band. Wave theory says that the pair may be both in the third and in the first trend impulse wave. In the first case, we might see further upward movement with an extension of the third wave; in the second case, a second correction wave with its own internal structure may be forming. The fact that the pair is near the resistance (the pair is only 50 points away from 1.200) and that a number of oscillators are in overbought territory, which indicates that the euro is overheated, points to a possible correction.
Bullish positions should therefore be held until the oscillators send a reversal signal or until the euro comes to a stop at the resistance, where the number of bullish positions should be cut and the possibility of opening shorts should be considered.

GBP/USD

The bulls successfully attacked the chart, overcoming the resistance at 1.3000. Among other things, strong fundamental data on the change in retail sales and unemployment contributed to this. Note the following technical factors that are present on the daily chart: the MACDF is rising, the parabolic system continues to confirm a strong bullish upward trend, and the Bollinger bands have narrowed, which technically implies consolidation.
On the weekly charts a triple bottom pattern was confirmed after the breakthrough of 1.2720. But the target after the pattern was formed was successfully reached (1.30000).
Consequently, there are as yet no indications that the bulls will be able to stay above 1.3000. If this is the case, a new correction wave to 1.2800 may form. Until then, we might be seeing the pair consolidate around that number for some time.

USD/JPY

Last week, using wave analysis, we anticipated a scenario in which the yen is in the second trend impulse correction wave on daily timeframes. It is being confirmed for now. Wave 2 reached a 61.8% correction and got to 110.6 yen per US dollar. If the scenario is correct, then we should expect the formation of a 3rd impulse wave, which naturally has to overcome the final level of the first wave (114.30).
Consequently, the bulls might gradually build their positions. We would designate a breakthrough of the resistance at 112 yen, where a 38.2% Fibo correction is located, and a 9-day exponential moving average as confirmation that the situation is following this scenario.

USD/CHF

Our predictions turned out to be fairly accurate. The bears successfully attacked, driving the US currency below the exponential moving average (0.9900). The sell signal was later confirmed by the formation of a 1-2-3 pattern based on Williams fractals at 0.9850. The trend remains bearish in the short term. Analyzing the daily chart, we should note that the pair is now testing the price channel’s lower boundary, where the lower Bollinger band is located. This gives bulls little hope that there will be a technical bounce up. The target might be 0.9880. But longs can be opened short term only if confirming signals are received, e.g., from oscillators.

AUD/USD

A graphic inverted head-and-shoulders is forming on the daily charts. A breakthrough at 0.7430 may be confirmation. That is where a 23.6% Fibo correction is also located. If there is a breakthrough, we might expect the aussie to head higher with a target of 0.7490. The graphic target for the completed bullish pattern might be 0.7530 (0.7540), where a 50% Fibo correction is located.

USD/CAD

The graphic pennant on the daily charts was not confirmed. The bears successfully attacked, breaking through the support at 1.3630. As a result, the pair continued to fall. The pair is now approaching the next boundary, which is 38.2% of the previous full-fledged growth wave – 1.3560.
According to Elliott’s wave theory, the pair is technically in a complex correction structure. Our hypothesis is that a flat correction with a 3-3-5 structure will form. The final C wave might turn out to be extensive. If that is the case, then we’ll see the formation of a second triplet structure. The triplet should end in a correction growth wave, after which, if this scenario proves correct, we can expect a final descending wave with a 5 structure. We’ll see next week how correct our assumptions are.

NZD/USD

This week the pair is in a technical bounce up, as we noted in our last weekly report. We won’t rule out that the bears will come back to the pair. If the bears succeed in attacking, an increase in sales should be expected if the 0.6850 level is broken through top down, which will complete the Williams fractals’ 1-2-3 pattern. If the bulls try to answer this call, then, for starters, they’ll need to overcome the 0.6950 level, where a 50% Fibo correction is located.

Oil

Locally oil is trading a little above the $53/barrel mark. Locally, the support is at $52.50, then at $52. The resistance lies at $53.25, $53.50, and $54.
Next week the focus should be on the following indicators:
- Tuesday, May 23: the American Petroleum Institute’s (API) preliminary estimate of oil inventories.
- Wednesday, May 24: Data on crude oil inventories from the US Energy Information Agency (EIA).
- Thursday, May 25: The results of the meeting of OPEC+ agreement representatives in Vienna.
- Friday, May 26: The weekly Baker Hughes data on the number of rigs.

Gold

Technically, the indicators and moving averages are moderately positive intra-day and relatively neutral for next week.
On Tuesday and Wednesday, we’d advise paying attention to new and existing home sales. The prediction for both is negative.
On Wednesday evening, we’ll see the market’s reaction after publication of FOMC minutes.
On Friday, we’ll take note of US quarterly GDP data: the forecast is positive.