Alaron Currency Comment

CHICAGO - Jan 22/08 - SNS -- Following is the currency futures comment from Alaron Trading Corp.

The DX opened 'even' at 76.98   and in a 'surprise' move by the Federal Reserve this morning, the Fed Funds rate was cut 75bp to 3.5% and the Discount Rate cut was lowered by the Board of Governors 75bp to 4%. Prices retraced to a mornng Lo of 76.40 as the 'yield-gap' increased against most major foreign currencies.Prompted by a 'global' sell-off in equity markets, the move by the Fed, along with a stimulus package of at least $150B soon to be inacted upon by Congress, should offer a 'life preserver' in a choppy sea of uncertainty. Prices bounced to a mid-day Hi of 76.60, but continued to trade on the lower rung of the daily range into the close to end the session at 76.54, down 44 tics. The s/t trend remains 'positive' w/ 'turning' momentum indicators. Traders will key on equity traders to see if Asian and European markets can recover. A higher Nikkei could see the return of carry-traders shorting JY and buying higher yielding foreign currencies, which could weigh on the DX. A lower DX may find Support at 76.125 and 75.710, while an open above 76.810 should find Resistance at 77.225 and 77.910.

The BP opened lower at 1.9464 and slid to a morning Lo of 1.9417 as pressure from a 'global' equity sell-off   found carry-traders taking profit/risk off the table and covering JY shorts. As the DX retraced, prices bounced to a daily Hi of 1.9575, before closing at 1.9565, up 62 tics. The s/t trend remains 'negative' w/  'weak' momentum indicators. Traders are looking for at least a 25bp rate cut at the next MPC meeting on  Feb. 6-7 to 5.50%, that could still be attractive to carry-traders. A higher open   should find Resistance at 1.9621 and 1.9677, while an open below 1.9519 may find   Support at 1.9463 and 1.9361.    

The CD opened lower at .9685 and slid to a mornng Lo of .9640 as the RBoC cut short-term rates 25bp to 4.0%. Prices rebounded to a mid-day Hi of .9789, before drifting lower towards the close to end the session at .9734, down 2 tics. The s/t trend remains 'negative' w/ 'weak' momentum indicators. Traders will key on the Canadian Leading Indicators and look for further rate cuts from the RBoC as needed. Lower energy/metals prices should weigh on prices. A higher open should find Resistance at .9802 and .9870, while an open below .9721 may find Support at .9653 and .9572.

The EC opened lower at 1.4488 and rebounded on DX weakness after the 75bp 'surprise' by the U.S. Fed. to a mid-day Hi of 1.4625. Prices slid towards the close to end the sesison at 1.4595, down 23 tics.The s/t trend remains 'negative' w/ 'neutral' momentum indicators. A higher open should find Resistance at 1.4651 and 1.4706, while an open below 1.4569 may find Support at 1.4514 and 1.4432.

The JY opened higher at .9400 as carry-traders covered JY short positions after the Nikkei fell 752 pts over-night, sparking a global sell-off. Prices rose to a morning Hi of .9460 after the DX retraced on the rate cut, but drifted lower into the close to end the session at .9430, up 36 tics. The s/t trend remains 'positive' w/ 'expensive' momentum indicators. Traders will see if equity managers 'buy' the dips, enticing carry-traders to increase 'risk' and buy higher yields, weighing on the JY. A higher open should find Resistance at .9463 and .9497, while an open below .9427 may find Support at .9393 and .9357.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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