Alaron Currency Comment

CHICAGO - Feb 7/08 - SNS -- Following is the currency futures comment from Alaron Trading Corp.

The DX opened higher at 76.55 and dipped to a morning Lo of 76.545 after a weaker than expected Jobless Claims  showing 22,000 less employed vs.expected 33,000. Prices rose after the report to a mid-day Hi of  77.19 as carry-traders exited trades and sold the weaker BP and EC. The BoE cut rates 25bp and the ECB kept rates 'unchanged' at 4.0%, but alluded to the need of lower rates in months ahead. Prices drifted lower towards the close to end the session at 77.11, up 81 tics. The s/t trend remains 'positive' w/ 'firm' momentum indicators. Foreign banks are finding it more difficult to obtain U.S. Dollars as the Libor - Overnight Index Spread widens from 20bp on Feb.1, to 37bp today, according to Robert Sinche, BoA global currency strategist in NY.C.. With further rate cuts ahead, Longs should tighten 'stops' or buy 'puts' to reduce exposure.A higher open should find Resistance at 77.450 and 77.795, while an open below .76.85 may find Support at 76.505 and 75.905.

The BP opened lower at 1.9390 after the BoE 'cut' rates by 25bp to 5.25%, citing a slowing economy and weak housing sector. BoE Governor Mervyn King mentioned that 'inflationary' worries would keep rate 'unchanged' for the near term. Prices rose to a morning Hi of 1.9430, before the stronger DX  sent price lower throughout the session to a daily Lo of 1.9355. Prices bounced into the  close and ended the day at 1.9363, down 191 tics. The s/t trend remains 'negative' w/  'weak' momentum indicators.  Should equity markets rebound, the  5.25% should appeal to carry-traders. A lower open may find Support at 1.9335 and 1.9308, while an open above 1.9383 should find Resistance at 1.9410 and 1.9458.  

The CD opened lower at .9875 and bounced to a morning Hi of .9910, before retracing to a mid-day Lo of .9865 on worries that exports will lag during the global slow-down. Priced bounced off the morning Lo back to our Support/Resistance level of .9910 level, unable to find buyers and drifting to a close of 9879, down 69 tics. The s/t trend remains 'negative' w/ 'neutral' momentum indicators. Higher oil/metals prices may help support sagging demand, but lower rates would help. A lower open may find Support at .9859 and .9840, while an open above .9885 should find Resistance at .9904 and .9930. Traders will key on the Jobs data that should show an increase from last month.

The EC opened lower at 1.4550 after the ECB kept rates 'unchanged' at 4.0%, as expected. ECB President Trichet said the current focus is on containing infationary concerns  and then on the potential slowing economy. He did acknowledge that rate cuts may be necessary in the future. Prices rose to a morning Hi of 1.4557, before retracing throughout the  day against a 'stronger' DX to a Lo of 1.4432 and bouncing into the close of 1.4445, down 167 tics. Traders discounted the 25bp cut for March as the yield-gap with the DX  would  tighten. The s/t trend remains 'negative' w/ 'weak' momentum indicators.Traders will key on the Target Lo of 1.4327 on 12 /20. A lower open may find Support at 1.4399 and 1.4353, while an open above 1.4478 should find Resistance at 1.4524 and 1.4603.    

The JY opened higher at .9453 as carry-traders took profit/risk off the table as equity markets headed lower in European trading. Prices rose to a morning Hi of .9467, before retracing along with most other major foreign currencies against a stronger DX. Prices fell to a mid-day Lo of .9299, before towards the close to end the session at .9331, down 78 tics.The close below the 9-day MA changes the s/t  trend to 'negative' with 'neutral' momentum indicators. A break below the .9300 Target Support could hit a number of 'stops'  below. A higher Nikkei could see some carry-trade activity, which should weigh on prices. Longs should tighten 'stops' or buy 'puts' to reduce exposure.A lower open may find Support at .9264 and .9198, while an open above .9366 should find Resistance at .9432 and .9534.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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