Alaron Currency Comment

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

The DX opened lower at 76.29 against most major foreign currencies after carry-traders sought higher yields as equity traders drove the Nikkei 225 higher overnight. Prices dipped ahead of the Jobless Claims report and release of the Trade Balance report, before rebounding on the better than expected Trade data showing exports reached record levels as exports shrank 6.9% and 9000 less on unemployment rolls. The DX rose to a morning Hi at our Pivot level of 76.55 ahead of testimony from Fed Chrm. Bernanke and Trea.Sec. Paulson in front of the Senate Banking Committee. Prices retraced as Bernanke stated that further 'downside risks' to the economy merited another round or 'rate cuts', possibly as soon as or before the March 18th FOMC meeting. Prices slid to a mid-day Lo of 76.15 as traders rotated out of DX and into higher yielding currencies. Prices bounced into the close and ended the session at 76.24, down 29 tics. The  close below the 9-day MA changes the s/t trend to 'negative' w/ 'neutral' momentum indicators. The increase in yield-gap  could weigh on prices, especially if there is further 'write-offs' in the financial sector. Traders may exit early ahead of the  Presidents' Holiday weekend, decreasing liquidity and increasing volatility. Be cautious. A lower open may find Support at 76.075 and 75.910, while an open above 76.310 should find Resistance at 76.475 and 76.710.

The BP opened higher at 1.9683 on carry trade activity as traders add the 5.25% yield to their portfolios with the hope that higher inflation will keep rate cuts on hold. Prices hit a morning Hi of 1.9700, before sliding to a morning Lo of 1.9640 and bouncing into the afternoon session.The BP bounced to an afternoon Hi of 1.9665 and drifted to a close of 1.9655, up 46 tics. The s/t trend remains 'positive' w/ 'neutral' momentum indicators. A weaker DX could see the BP attract yield buyers and target the Target Resistance level of 1.9892 on 1/30. A lower open may find Support at 1.9630 and 1.9605, while an open above 1.9665 should find Resistance at 1.9690 and 1.9725.

The CD opened higher at 1.0042 and slid to a morning Lo of .9977, before rebounding to a morning Hi of 1.0055 on DX weakness and hopes that further rate cuts will help Canada's largest trading partner's economy. Prices drifted lower into the afternoon session at traders adjusted positions ahead of the U.S. Holiday weekend. The CD retraced into the close, despite an increase in oil prices to end the session at .9996, down 21 tics. The continued slowing of the U.S. economy will continue to weigh on Canada's exports, slowing their revenues and likewise their GDP. Traders will look for rate cuts at the next BoC meeting, which should weigh on prices. The s/t trend remains 'positive' w/ 'neutral' momentum indicators. A lower open  may find Support at .9964 and .9931, while an open above 1.0009 should find Resistance at 1.0042 and 1.0087.

The EC opened higher at 1.4616 along with most other major foreign currencies, before sliding to a morning Lo as the DX bounced on the Trade report. Prices rebounded to a morning Hi of 1.4632 after Fed Chrm Bernanke indicated further rate cuts may be needed to stablize the U.S. economy, increasing the yield-gap with the EC and other major foreign currencies. Prices  drifted lower, along with equity prices into the close as the EC ended  the session at 1.4621, up 57 tics.  The close above the 9-day MA changes the s/t trend to 'positive' w/ 'improving' momentum indicators. Can the EZ continue to buck the trend of a slower 'global' economy without cutting rates? We shall see? As traders rotate out of DX, they will need to placed some into Euros, which has less downside pressure than the DX. A higher open should find Resistance at 1.4647 and 1.4672, while an open below 1.4606 may find Support at 1.4581 and 1.4540.

The JY opened lower 'flat' at .9264 as the Nikkei 225 index rose over 500 pts as Q4 GDP surged to +3.7% from +1.3% in  Q3. Carry-traders followed equity players, taking on more risk and shorting JY to buy higher yielding foreign currencies. Prices slid to a morning Lo of .9225, before lower U.S. equity markets saw traders taking profit/risk off the table, covering JY shorts and pushing prices to a mid-day Hi of .9286. The JY closed at .9285, up 21 tics on the short-covering. The s/t trend remains 'negative' w/ 'weak-neutral' momentum indicators. Weaker equities in Japan should see continued 'short-covering' by carry-traders, pushing the JY higher. A higher open should find Resistance at .9315 and .9345, while an open below .9270 may find Support at .9240 and .9195.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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