Alaron Currency Comment

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

The DX opened higher at 73.58 and rose to a morning Hi of 73.66 ahead of the CPI report. A lower than expected drop in the 'core' rate to +0.1% m/m, and +2.3% y/y suggested that inflation may be easing and rate increases may not have to be implemented as soon as origninally thought. Prices slid to a morning Lo of 73.39 and bounced into the afternoon session and climbing towards the close of 73.565, up 13 tics. The s/t trend remains 'positive' w/ firm momentum indicators. Will slowing inflation take the need of a rate increase off the table? Odds of keeping rates 'unchanged' at 2.00% at the June 25th FOMC meeting increased to 90%. Higher equity prices in Japan may entice carry-traders to seek higher yields, which could weigh on the DX ahead of a number of economic reports, most notable would be Jobless Claims. A lower open may find Support at 73.30 and 73.04, while an open above 73.65 should find Resistance at 73.91 and 74.25.

The CD opened higher at 1.0022 and rose to a morning Hi of 1.0033, continuing its four day run on growing optimisim that the 'worst' is over and a global recovery will heal all wounds. Prices slid to a mid-day Lo at our Pivot of .9960 after a weaker than expected U.S. CPI report that showed 'core' inflation  lower  than expected. Prices bounced into the afternoon session to an Hi of .9997, before sliding towards the close to end the session at .9964, down 1 tic. The s/t trend remains 'positive' w/ firm momentum indicators. Despite weaker energy/metals prices, the optimistism expressed of a firmer global environment may be short-lived. A lower open may find Support at .9916 and .9869, while an open above .9975 should find Resistance at 1.0022 and 1.0081.

The BP opened lower at 1.9360 and rose to a morning Hi of 1.9428, after the U.S. CPI report sent the DX lower. As the DX recovered, prices slid to a morning Lo of 1.9347, before bouncing into the aftrnoon session. Prices rose to a mid-day Hi of 1.9411, before drifting lower towards the close and ending the session at 1.9391, down 15 tics. With higher inflation and a slowing economy and weak housing sector, the U.K. may be following the U.S. economy's foot-steps towards 'stagflation'. Rate cuts will take a back-seat to curtail higher inflation, which may call for a rate increase, before a decrease. Lets see if s/t carry-traders take the 5.00% yield as equity managers bid the Nikkei higher. A higher open  should find Resistance at 1.9442 and 1.9492, while an open below 1.9377 may find  Support at 1.9327 and 1.9262.  

The EC opened lower at 1.5414 and rose to a morning Hi at our Pivot level of 1.5463, before sliding to a morning Lo of 1.5410. Prices recovered to  1.5450 as we head into the afternoon session.  The EC bounced to a mid-day level of 1.5461, before trailing lower towards the close to end the session at 1.5434, down 20 tics. The close below the 9-day MA changes the s/t trend to 'negative' w/ neutral momentum indicators. Pressure from comments of France's Finance Minister Christine Lagarde that the EC was 'over-valued' by up to 20% contributed to some of the risk being taken off the table. We will see if the yield-gap against the DX can attract s/t carry-traders on higher equity prices. A higher open should find Resistance at 1.5474 and 1.5513, while an open below 1.5423 may find Support at 1.5384 and 1.5333.

The JY opened lower at .9515 and followed most other major foreign currencies higher to a morning Hi of .9560, before drifting to a morning Lo of .9510 as the DX and equity prices moved higher. Prices bounced into the afternoon session, but slid to a daily Lo of .9508, before closing the day at .9513, down 48 tics. The s/t trend remains 'negative' w/ momentum indicators. Traders will test previous Support at the .9490 level, but a higher Nikkei could see carry-trade selling  hit 'stops' below and pressure the JY further. The s/t trend remains 'negative' w/ weak momentum indicators.A lower open may find Support at .9482 and .9451, while an open above .9532 should find Resistance at .9563 and .9613.

Bob Kozak

Alaron Research Team

800.462.4691

bkozak.com

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