Alaron Currency Comment

CHICAGO - Jan 14/08 - SNS -- Following is the currency futures comment from Alaron Trading Corp.

The EC opened higher at 1.4886 against a weaker DX and hit a morning Hi of 1.4890, before drifting lower to a mid-day Lo of 1.4860. Traders were pricing in a perceived 50bp rate cut in the U.S. rates, possibly   ahead of the Jan.29-30 FOMC meeting. With the yield-gap increasing against the DX and rate cuts on 'hold' for the ECB, traders are bidding the EC higher. Prices touched a daily Lo of 1.4859 and bounced into the close to end the day at 1.4868, up 88 tics.Traders will key on earnings from Citigroup, Intel and the U.S. PPI for Dec.. The s/t trend remains 'positive' w/ 'firm' momentum indicators. A strong showing in the Nikkei could lure carry-traders into play and bid the EC higher. A lower open may find Support at 1.4855 and 1.4841, while an open above 1.4872 should find Resistance at 1.4886 and 1.4903.

The DX opened lower at 75.58 as traders are discounting 'aggressive' action by the Fed and at least a 50bp rate cut on or before the the Jan.29-30 rate meeting. Prices slid to a morning Lo of 75.53, before bouncing to a mid-day Hi of 75.715 as equity prices advanced.. Prices drifted lower towards the close to end the day at 75.70, down 34 tics. The s/t trend remains 'negative' w/ 'weak' momentum indicators.  Traders will look for stronger earnings in the tech sector to counter any weaker financial or retail disappointments. Inflation  is put on the back-burner for now and can be addressed once the economy is off the 'liquidity' drip. A hgiher open should find Resistance at 75.80 and 75.90, while and open below 75.61 may find Support at 75.51 and 75.32.    

The BP opened higher at 1.9546, but worries over lower profit warnings   weighed on prices, sending the BP to a mid-day Lo of 1.9518, despite higher inflation in the Mfg. sector. Traders will key on the CPI to see if the BoE is comfortable enough with the inflation data to justify a rate cut or maintain rates at the current level. As the DX rose, the BP slid to a daily Lo of 1.9513, before close at 1.9515, down 8 tics. The s/t trend remains 'negative' w/ 'over-sold' momentum indicators. Another close above the recent 1.9505 lows, could signal some short-covering at present levels. A lower open may find Support at 1.9503 and 1.9492, while an open above 1.9525 should find Resistance at 1.9536 and 1.9558.

The CD opened higher at .9810 and rose to a morning Hi of .9849 on DX weakness and higher commodity prices.Concerns over the slowing in the U.S. economy continue to weigh on prices as the CD drifted lower  to a mid-day Lo of .9792, before rebounding w/the DX towards the close to end the day at.9822, up 21 tics. The s/t trend remains 'negative' w/ 'weak' momentum indicators. As long as the U.S. economy can 'tread' water and not sink into a recession the CD should keep pace. A higher open should find Resistance at .9850 and .9878, while an open below .9821 may find Support at .9793 and .9764.

The JY opened higher at .9336 against a weaker DX   as prospects of aggressive action by the Fed to stave off a U.S. recession increases the likelihood of steeper rate cuts.. As long as the U.S. consumers can have access to lower rates to borrow funds, the Japanese exporters will   have a viable marketplace. Carry-traders were on the sidelines during this public holiday, but covered short JY positions, supporting the move higher. Prices drifted lower towards the close to end the Holiday session at .9288, up 51 tics. The s/t trend remains 'positive' w/ 'firm' momentum indicators. A higher Nikkei could see carry-traders take on additional risk and sell JY  or wait for the Citigroup and Intel earnings. A  lower open may find Support at .9273 and .9257, while an open above .9304 should find Resistance at .9320 and .9351.    

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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