Trading plan for 31/05/2017:
Not much changes across the financial markets overnight. The Asian session was noted with low volatility, Shanghai Composite is up 0.2% and the Japanese Nikkei is losing 0.3%. On FX market only the British Pound is losing ground as the YouGov poll for The Times pointed out that Tories could run out of 16 seats to reach a majority in parliament.
On Wednesday 31st of May, the event calendar is quite busy with important economic releases, so global investors will pay attention to PMI Manufacturing data from China, German Unemployment Rate, and Retail Sales data, Net Lendings to Individuals and Mortgage Approvals from the UK, CPI and Unemployment Rate in the Eurozone, Gross Domestic Product from Canada and Pending Home Sales from the US.
EUR/USD analysis for 31/05/2017:
The Consumer Price Index data from the Eurozone are scheduled for release at 09:00 am GMT and market participants expect the annual rate of consumer inflation for the euro area is set to decelerate from 1.9% to 1.5%. The projected 1.5% increase is also moderately below the ECB's target of just below 2.0%. The decrease in inflation was spotted first in the CPI data from Germany and Spain, where the CPI weaken in April (German CPI decreased from 2.0% to 1.4%). Today's data might justify the ECB monetary policy outlook which includes further monetary stimulus and low interest rates.
Let's now take a look at the EUR/USD technical picture on the H4 time frame. The market has bounced from the technical support at the level of 1.1108 and got back inside of the golden channel. Nevertheless, as long as the upper boundary of the channel around the level of 1.1200 is not clearly violated, the corrective cycle continues. The market conditions are oversold and the market is bouncing higher, but the momentum indicator is still below fifty level. Worse than expected data will result in further deterioration towards the next technical support at the level of 1.1075 or below.
USD/JPY analysis for 31/05/2017:
The Pending Home Sales data are scheduled for release at 02:00 pm GMT and market participants expect a good start of the second quarter with 0.7% gain after -0.8% decrease in the last month. Residential housing construction and existing home sales both fell in April, but if today's data meet the consensus, then it will be close to its highest level since the recession ended. Moreover, if it beats the consensus, then the expectations for the second-quarter GDP growth will increase as well (current expectations for the GDP are a 3.2% increase in output in Q2, sharply above Q1's sluggish 1.2% advance). The equation is simple here: if the data beat, the US Dollar will fly up.
Let's now take a look at the USD/JPY technical picture on the H4 time frame. After the rising wedge formation breakout, the market is trading sideways and no new low or high has been made yet. The golden trend line is still providing a dynamic resistance around the level of 111.15, but the oversold market conditions might suggest another test of the nearest technical resistance at the level of 111.44. The next technical support is seen at the level of 110.54.
Market Snapshot: SPY (SP500 ETF) gaps up again, but no momentum is present
The US SP500 index (SPY) gapped up at the beginning of the week and made a new higher high at the level of 242.05. Nevertheless, there is no bullish momentum present and the trading conditions look overbought. The price is still trading above all of the moving averages, but there is still an unfilled gap (marked as a gray rectangle) that need to be filled. The next technical support is seen at the level of 240.63.
