Alaron Currency Comment

CHICAGO - Mar 17/08 - SNS -- Following is the currency futures comment from Alaron Trading Corp.

The DX opened lower at 71.73 after the Fed lowered the Discount Rate by 25bp to 3.25% and made funds available to other non-Primary dealers as they infuse more liquidity into the system to reduce the 'anxiety' in the financial markets surrounding the Bear Sterns situation. Prices rose to a morning Hi of 72.075, despite negative data from the Empire State Mfg.Survey, which showed a drop to a record Low of -22.23 from -11.72 in Feb. President Bush tried to instill confidence in the market place by stating that "the United States is on top of the situation." Traders and Investment Bankers are looking for a 100bp rate cut at Tuesdays' FOMC meeting, from 3.00% to 2.00%. Prices drifted lower into the close and ended the day at 71.955, down 15 tics. The s/t trend remains 'negative' w/ 'over-sold' momentum indicators. With equity markets improving heading into the close, we could see bargain hunters hinting that the 'worst' may be over. Will the Fed cut less than 100bp, suggesting that the economy and DX are set to rebound? We shall see. A higher open should find Resistance at 72.285 and 72.615, while an open below 71.745 may find Support at 71.415 and 70.875.

The BP opened lower at 1.9894 as carry-traders unwound positions as equity markets in Asia and Europe retraced on financials concerns stemming from a collapse of Bear Sterns. Prices were under further pressure after the BoE provided banks with extra cash, essentially a form of easing, to avoid further liquidity stress. As the DX continued to retreat, prices rose to a mid-day Hi of 1.9950, before sliding to a daily Lo of 1.9845 and ending the session at 1.9863, down 196 tics. The close below the 9-day MA changes the s/t trend to 'negative' w/ 'neutral' momentum indicators. A lower open may find Support at 1.9822 and 1.9781, while an open above 1.9886 should find Resistance at 1.9927 and 1.9991.

The CD opened lower at 1.0049, touched a morning Hi of 1.0050 and retraced to a mid-day Lo of .9950  on continuing conserns that the U.S. slowing will  be reflected in the  Canadian economy. Lower  oil/metals prices added downside as traders took profit/risk off the table.The BoC tightened funds by taking further liquidity  'out' of the economy, also easing pressure on prices. The CD bounced into the close to end the day at .9967, down 154 tics. The close below the 9-day changes the  s/t trend to 'negative' w/ 'neutral' momentum indicators.  The BoC is letting the market know that it is accord with the Fed and tied to the U.S. economic scenario. We could see the BoC announce a rate cut,  depending on the FOMC outcome. A lower open may find Support at .9928 and .9889, while an open above .9989 should find Resistance at .1.0028 and 1.0089.      

The EC opened higher at 1.5693 and rose to a morning Hi of 1.5716 as the DX continued to falter under the pressure of lower rates and financial turmoil in the U.S. Prices retraced to a morning Lo of 1.5620 and bounced into the afternoon session, closing at 1.5655, up 65 tics. The s/t trend remains 'positive' w/ 'over-bot' momentum indicators. Pressure to cut U.S.rates as much as 100 bp  should support higher EC prices. Exporters will pressure the ECB to cut  rates. Longs should tighten 'stops' or buy 'puts' to reduce  exposure ahead of  next months G-7 conference. A lower open may find Support at 1.5611 and 1.5568, while an open above 1.5664 should fnd Resistance at 1.5707 and 1.5760.  

The JY opened higher at 1.0374 as pressure from carry-traders to cover short JY positions and  a lowering by the Fed of the Discount Rate by 25bp sent the JY to a morning Hi of 1.0385, before  retracing throughout the day and hitting a  late afternoon  Lo of 1.0295, before bouncing to a close of 1.0305, up 180 tics. The s/t trend remains 'positive' w/ 'over-bot' momentum indicators. Japan's  finance minister, Fukushiro Nukagaa,  said that recent moves by the JY are 'excessive', but the government is not considering any specific action (intervention) at the moment. Longs need to tighten 'stops' or buy 'puts' to reduce exposure to a sudden  reversal. A lower open may find Support at 1.0272 and 1.0238, while an open above 1.0328 should find Resistance at 1.0362 and 1.0418.  

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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