Alaron Currency Comment

CHICAGO - Sep 12/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

U.S. DOLLAR INDEX (DXU6):

The DX opened lower at 85.79 after 'hawkish' remarks from a ECB member that the 50 bp rate increase is still very likely before the end of the year. Prices slid to a morning Lo of 85.75, before climbing to a morning Hi of 85.98. As we head into the afternoon session, the DX is at 85.90. Prices slid to our Pivot level of 85.84, before bouncing to an afternoon Hi of 85.96, before falling back to our Pivot level close of 85.85, down 11 tics. The s/t trend remains 'positive', but momentum indicators are turning lower, suggesting lower prices ahead. With lower oil prices continuing to weigh on 'inflation' worries, the Fed may not need to raise rates towards year end, which could lessen support for the DX. Longs should tighten 'stops' or purchase a 'put' to reduce exposure.A higher open should find Resistance at 86.06 and 86.26, while an open below 85.84 may find Support at 85.64 and 85.42.

CANADIAN DOLLAR (CDU6):

The CD opened lower at .8922 and rose to a morning Hi of .8936, before a report showing Housing Starts fell to a yearly low and a 'sell-of' in the energy/metals complex sent prices to a morning Lo at our initial Support level of .8910 as we begin the afternoon session. Prices traded at the 'lower-rung' of our trading range most of the afternoon; ending the session at .8917, down 11 tics. The s/t trend remains 'negative' with momentum indicators remaining weak, suggesting pressure on prices. Traders will need help from a lower DX and higher energy/metals prices to move higher. A lower open may find Support at .8906 ( 50% Fib Ret ) and .8895, while an open above .8921 should find Resistance at .8932 and .8947.

BRITISH POUND (BPU6):

The BP opened lower at 1.8651 as traders continue to take further profit/risk off the table after the factory-gate inflation data slowed to 2.6%, vs the expected 2.7%. With the PPI showing a 'flat' reading vs the expected increase of +0.2%, the BP rose to a morning Hi at our Pivot level of 1.8662, before retracing to a morning Lo of 1.8600. As we approach the start of afternoon trading, the BP has bounced to 1.8629. Prices rebounded to an afternoon Hi of 1.8655, before drifting lower into the close of 1.8653, down 3 tics. The s/t trend remains 'negative' with momentum indicators suggesting lower prices ahead. Stochastics are 'over-sold' and would support a 'rebound' at these levels, otherwise the likelihood of a test at the .618 Fib Ret level of 1.8568 is favorable. A higher open should find Resistance at 1.8677 and 1.8700, while an open below 1.8638 may find Support at 1.8615 and 1.8576.

EURO-CURRENCY (ECU6):

The EC opened higher at 1.2720 after a ECB member reinforced the proposed rate hike would likely occur by year-end. Prices rose to a morning Hi of 1.2724, before retracing to a morning Lo at our Pivot level of 1.2688. Prices bounced to 1.2700 as we approach the afternoon session. As the DX drifted lower during the last hour of trading, the EC bounced to 1.2709, before ending the day at 1.2707, up 27 tics. The s/t trend remains 'negative', however, momentum indicators are starting to 'reverse', suggesting the likelihood of a recovery is favorable. Talk by the ECB of a rate increase will 'attract' specs. A higher open should find Resistance at 1.2725 and 1.2742, while an open below 1.2706 may find Support at 1.2689 and 1.2670.

. JAPANESE YEN (JYU6):

The JY opened lower at .8528 and rose to a morning Hi at our initial Support level of .8537, before retracing to a morning Lo of .8499. The JY bounced to our secondary Support level of .8416 as we begin the afternoon session. Prices could only grab another couple of tics higher as the DX drifted lower towards the close, ending the day at .8514, down 52 tics. The s/t trend remains 'negative' as momentum indicators continue to suggest lower prices ahead. With the G-7 conference this Friday and concern for stronger foreign Asian currencies a likely topic of discussion, a short-covering rally off of the recent low is probable. Shorts should look to tighten 'stops' or purchase a 'call' to reduce exposure. A lower open may find Support at .8496 and .8479, while an open above .8517 should find Resistance at .8534 and .8555.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak@alaron.com

www.alaron.com

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