U.S. equity markets are trading better overnight. The shift from concerns about the Euro Zone back to the recovery in the U.S. economy is helping to drive up demand for U.S. stocks.
The June E-mini is currently testing its first upside objective at 1105.75. If investors can build a support base at this price, then look for the move to continue to 1122.00 over the near-term. A failure to hold 1105.75 sets up a possible retracement back to 1071.75.
U.S. equity markets are hitting a critical point on the charts this morning. If sellers show up on this rally, then there is a strong possibility that a new lower top will form. This will indicate that the stock markets are entering a new bear market. The main trend is still down on the daily chart and won’t turn up until the June E-mini crosses the last swing top at 1174.75.
Higher stock prices should keep the pressure on the September Treasury Bonds as investors liquidate flight-to-safety positions. The chart indicates 119’22 is the next downside target should appetite for risk continue to increase.
August Gold traders have a decision to make. They will either begin liquidating hedge positions placed during the height of the financial crisis in the Euro Zone or start buying gold because of the weaker U.S. Dollar. At this time the chart indicates that the market is at a balance point inside the retracement zone at $1209.70 to $1219.50. Breaking back under the lower end of this range will be a bearish signal. A break out above the upper end will be bullish.
Greater demand for risk continues to drive September Crude Oil higher. This market is being helped by the turnaround in the Euro. The chart pattern suggests that a move to 80.88 is likely over the near-term.
The U.S. Dollar is trading mixed against most major currencies ahead of the U.S. three-day week-end. The Dollar was under pressure early in the session after the Euro and British Pound surged in continuation of Thursday’s big rally. Since then it has settle into a range versus both currencies. Firm equity markets are helping the Dollar/Yen post a modest gain. Greater demand for risk has the Dollar trading lower versus the Canadian and New Zealand Dollars while slightly lower against the Australian Dollar.
News that China denied it was reviewing its holdings of Euro sovereign bonds helped to reverse a sell-off in the Euro on Thursday. The Euro was also helped by China’s reaffirmation of its long-term strategy of diversifying currency holdings away from the Dollar.
The June Euro was also buoyed by the news that Spain’s minority Socialist government won parliamentary backing yesterday for its austerity program by a single vote. Spain continues to push toward cutting its budget deficit in an effort to regain market confidence weakened by the Euro Zone debt crisis that spread from Greece.
Although the main trend remains down until the Euro crosses the last swing top at 1.2671, the chart pattern suggests further upside is likely today if the market can establish support inside a retracement zone at 1.2407 to 1.2345. The downtrending Gann angle at 1.2542 is the only obstacle stopping the Euro from reaching the retracement zone today.
The June British Pound is trading slightly lower this morning after a slight rise overnight. The current chart pattern suggests that a rally to 1.4810 is likely over the near-term. Investors have been regaining confidence in the British Pound following moves by the new government to approve austerity measures designed to balance the budget and cut government debt.
Stronger equity markets could help drive the June Japanese Yen lower. Increased appetite for risk is likely to drive up demand for the carry trade which should keep the pressure on the Japanese Yen. The charts indicate that 1.0854 is the next likely downside target followed by 1.0854.
Higher crude oil and stocks are helping to underpin the June Canadian Dollar. Technically the market broke through a 50% price level at .9552 overnight, setting up a potential rally to the next price target at .9632. The Bank of Canada is set to meet on June 1. Speculators are looking for the BoC to hike its benchmark interest rate.
End of the month position evening helped pressure the Dollar on Thursday, but the easing of tensions in the Euro Zone and renewed support from China for Euro sovereign debt are having the biggest influence on the Forex markets at this time. Barring any fresh bearish news, look for the U.S. Dollar to remain under pressure over the near-term with the potential for a change in trend to down on a move through the last swing bottom at 85.33. 
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