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Currency Trading Update

LorAs we speculated yesterday, Tuesday’s leader lost his place in the top spot due to a few GBP/JPY positions that moved out if his favor. Instead, we saw contestant number 5 from Tuesday become contestant number 1 by Wednesday’s close, as he made roughly $13,000 trading GBP/USD. GBP/USD was actually the fourth most traded pair yesterday, following the consistently popular EUR/USD, USD/JPY, and GBP/JPY.

However, it was contestant number 2 who perhaps made an even more aggressive jump in the leaderboard, as he ended Tuesday as contestant number 13. This contestant has made his profits this week in a rather unorthodox way: trading AUD/JPY. Looking at Wednesday’s contest stats, less than 2% of traders utilized this pair, and those that did generally ended up losing out. Like many of the Japanese yen crosses, AUD/JPY can be particularly volatile and tough to trade. However, given the pair’s tight consolidation above its October lows, contestant number 2 appears to be awaiting a break higher.

Looking ahead, event risk will be heavy for the US dollar on Friday morning:

Asian Trading Session
12/12, 00:00 ET
Japanese Consumer Confidence (NOV) – Consumer confidence in Japan is forecasted to have turned increasingly pessimistic during the month of November, as the headline index (including one-person households) is expected to slip to the lowest level since at least 2004, when record-keeping began. Likewise, the index excluding one-person households is also likely to drop to the worst levels in at least 26 years, as record-keeping began in 1982. With the Japanese economy already in recession thanks to lackluster consumption and waning foreign demand for exports, indications of weakening consumer sentiment does not bode well for domestic demand going forward.

European Trading Session
**No key economic releases scheduled to be released.

US Trading Session
12/12, 8:30 ET
US Advance Retail Sales (NOV) – The Commerce Department’s release of US retail sales is forecasted to fall negative for the fifth straight month in November at a rate of -2.0%. Such a decline won’t be entirely surprising given the combination of the jump in the unemployment rate to a 15-year high, the continuing collapse in the housing sector, and persistently tight credit conditions. Furthermore, the National Bureau of Economic Research (NBER) has already declared that the US economy fell into recession in December 2007, so going forward, these retail sales results will simply become a gauge of how bad things really are. Disappointing retail sales figures could weigh on the US dollar, especially ahead of next week’s Federal Reserve meeting, as the bank is anticipated to cut rates by at least 50 basis points to 0.50%.

12/12, 10:00 ET
US University of Michigan Consumer Confidence (DEC P) – The preliminary reading of the University of Michigan’s consumer confidence survey is forecasted to fall even further to a 28-year low of 54.8 in December from 55.3. Traders should beware that while this report has a 10:00 ET official release time, it tends to hit the wires a few minutes early, which can sometimes spark a bit of a “surprise” factor in the markets. Similar to the release of US retail sales, a disappointing consumer confidence result could weigh on the greenback, as it would raise speculation that the Federal Reserve will indeed cut rates aggressively on December 16.