Alaron Currency Comment

CHICAGO - Jan 3/07 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

U.S. DOLLAR INDEX (DXU6):

The Dollar opened higher at 83.30 and rebounded sharply on better than expected economic data and a report showing Central Banks increased their Dollar reserves slightly in Q3. Prices slid after the open after the ADP private employment projection, showing a reduction of 40,000 vs the expected 110,000 by the labor department. After the ISM Mfg.Index report showed an increase to 51.4 from Nov. 49.5, shorts covered and stops were hit as the DX ran to an intra-day Hi of 83.80, ahead of the release of the FOMC minutes. A mixed reaction to the FOMC report showed voting members concerned over the 'weakness' of the housing sector, while still agreeing that 'inflation' remained the dominant focus and more policy tightening was possible. The DX drifted lower after the report and ended the session at 83.68, up 71 tics. The close above the 9-day MA changes the s/t trend to 'positive' as momentum indicators improve and await further follow-thru buying. Lack of additional follow-up buying could see a reversal on any weak economic data Thursday. A higher open should find Resistance at 84.01 and 84.35, while an open below 83.47 may find Support at 83.13 and 82.59.

Canadian Dollar (CDH7):

The CD opened lower at .8573 and bounced to our secondary Resistance of .8578, before a stronger DX and weaker energy/metals prices sent the CD to a morning Lo of .8557. As the DX held most of its gain and energy prices continued to weaken, the CD dipped to a daily LO of .8552 at the closed, down 43 tics. The s/t trend remains 'negative' with weak to 'over-sold' momentum indicators. We will need weakness in the DX and a rebound in energy prices for any 'short-covering' rally, otherwise we could revisit the Nov.06' Target Support of .8503. A lower open may find Support at .8543 and .8535, while an open above .8561 should find Resistance at .8569 and .8587.

British Pound (BPH7):

The BP opened lower at 1.9625 as traders took profit/risk off the top after Tuesday's run-up and lack of follow-thru buying at the 1.9750 level during over-night trading. Prices retraced on the U.S. data to a morning Lo of 1.9492 and bounced to 1.9512 as we await the results of the FOMC data. Prices hit a daily Lo of 1.9486, before bouncing to a close of 1.9511, down 231 tics. The close below the 9-day MA changes the s/t trend to 'negative' as the large-range down close will need further conviction that the proposed rate increase of 25bp has more to go.Momentum indicators are 'weaker' and suggest a test of the 38% fib level of 1.9478. A lower open may find Support at 1.9455 and 1.9398, while an open above 1.9542 should find Resistance at 1.9599 and 1.9686.

Euro-Currency (ECH7):

The EC opened lower at 1.3285 as traders took profit/risk off the table after lack of follow-buying at Tuesday's 1.3340 level. Prices hit a daily Hi of 1.3304, then retraced to a morning Lo of 1.3206, as short-covering sent the DX higher. Traders await the latest FOMC data before making significant moves ahead of the close. Prices hit a daily Lo of 1.3195, before bouncing higher towards the close to end the session at 1.3211, down 122 tics.The close below the 9-day MA changes the s/t trend to 'negative' with weaker momentum indicators. Traders will key on the U.S. economic data Thursday and Friday for keys to direction. A lower open may find Support at 1.3169 and 1.3128, while an open above 1.3237 should find Resistance at 1.3278 and 1.3346.

Japanese Yen (JYH7):

The JY opened lower at .8477 and bounced to a daily Hi of .8482, before following most other major foreign currencies lower on the DX rebound. Prices retraced to a morning Lo of .8438 and traded in a tight range ahead of the FOMC data. The JY bounced higher into the close to end the session at .8463, down 37 tics. The latest 'new' low maintains the 'negative' trend as momentum indicators struggle to move away from the 'over-sold' levels. Lower energy prices could help the economy recover, but traders will need further evidence that the economy is recovering and rate increases are forthcoming. A higher open should find Resistance at .8484 and .8505, while an open below .8461 may find Support at .8440 and .8417.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak@alaron.com

www.alaron.com

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