Dollar Index (DXZ8):
The DX opened higher at 87.35 and rose to a morning Hi of 87.46, before sliding to a mid-day Lo of 86.89 as pressure from a 'short-covering' rally in the BP and JY saw traders taking profit/risk off the table at the 2.5yr. Hi. While the slowing global economy is a major concern, pressure from an 'over-sold' BP and unwinding of carry trades in the JY helped send the DX lower. Prices bounced towards the close as equity markets improved and oil prices drifted lower. The DX ended the session at 87.21, down 99 tics. The s/t trend remains 'positive' w/ topping momentum indicators. Traders have discounted Tuesday's weaker PPI, but will look for direction from the testimony of Bernanke/Paulson/Blair in front of the House Financial Services Committee. A lower open may find Support at 86.66 and 86.12, while an open above 87.44 should find Resistance at 87.98 and 88.76.
British Pound (BPZ8):
The BP opened higher at 1.5000 and rose to a mid-day Hi of 1.5072 as 'shorts' took profit/risk off the table after the recent low of 1.4551 held. Prices drifted lower as the DX moved higher towards the close, holding the BP below the initial Resistance level of 1.5040, before ending the day at 1.5014, up 79 tics. The s/t trend remains 'negative' w/ weak momentum indicators. Lack of volume suggests 'weak' shorts took profit/risk off the table, while existing 'shorts' look for further weakness ahead of the Dec. 4th MPC rate meeting and another rate cut. A higher open should find Resistance at 1.5175 and 1.5341, while an open below 1.4905 may find Support at 1.4739 and 1.4469.
Canadian Dollar (CDZ8):
The CD opened lower at .8132 and slid to a morning Lo of .8082, before bouncing to a mid-day Hi of .8253 on DX weakness and higher oil/metals prices. As energy/metals prices retraced, the CD slid to our Pivot level of .8180, before closing the session at .8172, down 29 tics. The s/t trend remains 'negative' w/ neutral momentum indicators. While key Support has held at the 61.8% Fib level of .8084, lower oil/metals prices will continue to weigh on prices. A higher open should find Resistance at .8270 and .8369, while an open below .8155 may find Support at .8056 and .7941.
Euro Currency (ECZ8):
The EC opened lower at 1.2634 and slid to 1.2615, before rebounding along with most other major foreign currencies to a mid-day Hi of 1.2728. As the DX moved higher towards the close, the EC retraced to a close of 1.2663, down 115 tics. The s/t trend remains 'negative' w/ weak momentum indicators. Unless the DX retraces from recent levels, the need for further rate cuts at the Dec.4th ECB meeting should continue to weigh on prices. A higher open should find Resistance at 1.2762 and 1.2861, while an open below 1.2629 may find Support at 1.2530 and 1.2397.
Japanese Yen (JYZ8):
The JY opened higher at 1.0381 and rose to a morning Hi of 1.0402 as carry-traders cover JY short positions on continued risk-aversion. Prices drifted to a mid-day Lo at our Pivot level of 1.0290 as U.S. equity markets moved higher. Prices rose into the close as equity markets sold-off and further unwinding of carry-trades continued to push the JY to a close of 1.324, up 65 tics for the day. While Japan entered a 'recession' after the Q3 GDP showed a second consectutive quarter of negative growth, the JY continues to show a 'positive' s/t trend w/ firm momentum indicators. A lower open may find Support at 1.0242 and 1.0160, while an open above 1.0341 should find Resistance at 1.0423 and 1.0522.
Bob Kozak
Alaron Research Team
800.462.4691
bkozak@alaron.com
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