Slow News Day, Quiet Market

Fundamentals
Yesterday was fairly quiet. Italy’s consumer price index was published at 8:00 am GMT. It was 0.4% on a monthly basis.
Also, the change in New Zealand’s retail sales, an indicator of consumer activity, was published at 10:45 pm GMT. The number was 1.5%. This provided a little support to the national currency, which added 9 points over an hour.
The change in China’s industrial output was published. The change in industrial output in the Middle Kingdom shrank to 6.5% versus a forecast of 7%.
The UK’s consumer price index comes out today at 8:30 am GMT. It is expected to be 2.6% on an annual basis.
Data on the number of US new housing permits issued will be announced at 12:30 pm GMT. The number of permits is expected to rise to 1,270,000; the number of new foundations poured comes out (the forecast is 1,260,000) at the same time.

Stocks
Among corporate reports, we’d advise focusing on Britain’s Vodafone, whose depositary receipts are traded on America’s NASDAQ. You’ll recall that in 2016 the company’s assets grew significantly to €169,107 million, which was even higher than the 2013 figure. But note that the company’s leverage ratio was higher than in 2013, which indicates that the company’s assets have come to be financed more with borrowed money. The size of the dividends, which in 2017 were the lowest since 2005, does not make investing in this company’s stock very appealing. The company’s stock is now in a stable bearish trend.
Overall, the US market rose yesterday. Apple stock continues its steady growth against all odds. Still, we already noted that the stock might be in the fifth trend impulse wave according to Elliott’s wave theory. Consequently, we should still expect a correction wave that just might get to $131. Bulls should therefore set short stops and be ready to re-open positions in the opposite direction.
Russia’s MICEX Index barely budged over the day, closing at 2003.12. Fundamentally, oil is propping up the market. Everyone is awaiting decisions emerging from the next OPEC meeting on May 25, 2017, where an extension of existing agreements on cutting oil production will be discussed. Technically, according to Elliott’s wave theory, the index is in a correction wave. As usual, there are several possible scenarios, which we’ll try to talk about in future overviews.
Currency Market
The AUD/JPY pair is near the price channel’s lower boundary – at 84 yen per Australian dollar. That’s also where the 9-day EMA is located. Note that the aussie might just head for the nearest resistance at 85 yen, where the upper boundary of the Bollinger bands is located.
The scenario in which the USD/SGD pair is in the 4th correction wave that we wrote about is still not confirmed. But it’s still early to talk about revising this scenario – this can be done only if there is a bottom up breakthrough at 1.3970. As we indicated, the US dollar hit the target of 1.4040 and fell, breaking through the 9-day MA top down. There was also a breakthrough of the 21-day MA, which indicates a reversal of the short-term trend. Traders will likely prefer to trade the pair mostly on the down side, especially if they get confirmation in the form of a full-fledged breakthrough of the middle Bollinger band and an intersection of the moving averages. The downward target could be 1.3900.
After strong growth in the GBP/JPY pair, the bears might try to counter attack. A breakthrough at 146 yen might be the sell signal. The target is fairly low – 2 figures, i.e., 145. We advise people trading on the rise to be cautious and ready to reverse positions if the bears’ attack succeeds.

Nikolay Dudchenko, Olymp Trade analyst.

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