COMMODITY REVIEW AND OUTLOOK

195 Route 6A, Suite 6, Orleans, Massachusetts

(October 16, 1997) CURRENCIES: SHORT TERM–If the CPI is higher than expected, look for a selloff in the dollar. Many traders suspect that the recent rate hike by the Germans means that the U.S. rate hike is more likely. The higher than expected PPI number reinforces that perspective.

LONG TERM–Conservative or undercapitalized traders should stay away from the currencies for now. The ultimate trend of the dollar is still in question, and these are choppy markets. The December Swiss chart pattern is becoming a bit negative. A two-side trade might be best for aggressive traders. If an aggressive bull, consider buying a dip to the low 6900's with stops under 6855 or 6833 and/or sell rallies to the upper 6900's with stops over 7021 or of 50-100 points. If 7021 is taken out, consider reversing to the long side. Break out traders might also hold out for that penetration. Objective is open.

RESISTANCE–Resistance remains near 6921-6947, 7000, 7016, 7037, 7058, 7096.

SUPPORT–Support lies near 6872-6882, 6860, 6780, 6740-6760, 6714-6695, 6635, with further support near 6602.

DECEMBER MARK–Aggressive traders might buy this pullback to the 5720's with stops under 5647. Be alert for failures near 5750-5760. The currencies have had some odd twists and turns. Option traders might buy calls. Objective is open.

RESISTANCE–Resistance lies near 5763, 5790-5800, 5844- 5858.

SUPPORT–Support lies near 5727, 5675, 5647, 5607, 5580, 5538.

DECEMBER YEN–The yen has looked excellent a number of times, only to fail. Now we've seen it again. Be cautious if trading the yen. Apparently international capital does not consider Japan a home, merely a resting spot. Aggressive traders might sell the December yen on a rally to the 8300-8350 area with stops of 50-100 points or over 8437. Watch for a reversal as the 8230 level is approached. Option traders should sit this one out. New lows into the 7900's remain a possibility.

RESISTANCE–8325 (current level), 8410-8400, 8440-8460, 8520 or so, 8582, low 8600's-8620, 8725 or so.

SUPPORT–8280-8275, 8231-8223.

DECEMBER DOLLAR INDEX–The dollar continues to provide sloppy action. The inability to make new low adds an ambiguity to the action. Still the action has been negative. Sell the December dollar on rallies to the upper 9600's or so if aggressive, 9710-9720 if more conservative with stops over 9770. One can't count out the current formation becoming a near-term low, so watch for buying in the low 9600's, and aggressive traders could contemplate buying there with 25-50 point stops, looking for a rally back to the upper 9600's, lower 9700's.

RESISTANCE–Resistance lies near 9705, 9740, 9770, 9820-9840, 9880-9900.

SUPPORT–Support lies near 9660- 9670, 9620, 9580-9570, 9530's.

M. Steven Morgan

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