U.S. equity markets are called lower this morning based on a weaker overnight trade. Overnight, the June NASDAQ made a new high for the year after Apple reported better than expected earnings.
Many traders feel that this week’s rally may have been too much too fast which could slow down demand for stocks today. The question will be whether investors want to chase this market higher or wait for a correction before entering.
Equity traders are getting mixed signals from the currency markets this morning. There are risk concerns because of the weakness in the Euro. A weaker Dollar/Yen and Australian Dollar indicates that demand for riskier assets may be down today.
Look for a sideways-to-lower trade if the S&P 500 and Dow do not make an attempt to catch up to the rising NASDAQ. This will create a divergence which could encourage traders to lighten up on there long positions.
June Treasury Bonds and Notes are trading a little better. Traders are watching the stock market and the situation in Greece for direction. Gains have been limited however because of the massive amount of debt inventory available. Unless stock market volatility increases, look for a tight, rangebound trade today.
Both June Gold and June Crude Oil are trading sideways. Pressure is building on both of these contracts because of the firm Dollar.
The U.S. Dollar is trading mixed overnight. Weakening equity markets are contributing to a renewed drive into lower yielding currencies.
The June Euro continues to get pounded. Overnight the Greek 10-year Bond/German Bund Spread hit a new 12-month high at 492 basis points. Investors are asking for protection from a potential collapse in the Greek debt market. Greece is also beginning to implement some of its newly proposed austere financial measures designed to tighten up debt and improve its cash flow. Facing a huge rise in the cost to service its debt, Greece is scheduled to meet with certain European Union officials and the International Monetary Fund to discuss the terms of the recent bailout proposal.
Talk is circulating that the recent bailout plan is underfunded. Hedge funds continue to short the Euro in anticipation of more borrowing by Greece and another proposal from the EU/IMF to provide additional emergency funds if necessary.
The June British Pound is trading steady to better overnight while hugging a .618 retracement line at 1.5419. Overnight the Bank of England minutes were released. The minutes revealed that the BoE members voted 9-0 to keep interest rates at historically low levels, but that inflation was a concern. On Tuesday a report was released showing U.K. CPI had risen to 3.4%. This percentage was almost twice the target of 2.0%. After providing stimulus for months in an effort to revive the economy, the BoE will now have to figure out how to begin removing the stimulus to lower inflation without upsetting the developing recovery.
The upcoming May 6th election is also a concern for U.K. investors at this time which is helping to limit gains. Traders maintain that the election is too close to call and that there is still a strong possibility of a hung parliament. This could mean that without a majority in the parliament, a plan to slash the U.K. budget deficit may not be able to be implemented.
The weaker Euro is helping to pressure the June Swiss Franc. Technically, this market seems poised to breakout to the downside. Traders are selling the Swiss Franc in anticipation of further intervention by the Swiss National Bank. The SNB is mandated to protect its economy and its export market by purposely weakening its currency when it advances substantially against another. In this case, the falling Euro gives the appearance of a rising Swiss Franc. This means that without intervention, Swiss exports may suffer because traders will seek cheaper goods in the Euro Zone.
The June Japanese Yen broke overnight into a 50% retracement level at 1.0741. The test of this level is producing a technical bounce to the upside. Fundamentally, a small break in global equity markets overnight is encouraging traders to buy lower yielding, lower risk assets. This currency could get volatile depending on how the U.S. equity markets trade.
The June Canadian Dollar is still rallying following Tuesday’s announcement by the Bank of Canada that it is going to begin hiking interest rates sooner than expected. The Canadian Dollar rose to a new 22-month high overnight. Traders feel this currency will continue to rise as long as the U.S. keeps interest rates low and because of the improving Canadian economy. The BoC wants to act as early as June 1st in order to stem the harmful effects of inflation. Aside from a few profit-taking breaks triggered by the dumping of higher risk assets, look for traders to continue to support the Canadian Dollar. 
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