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Frontrunner's Lead Hinges Upon USD/JPY - Will It Break Higher?

The currency trading portion of the contest is getting very exciting, as our leader has held the top spot for nine consecutive days. However, another contestant is right on his tails, as he holds the other two portfolios in the top three and trails the leader by less than $6,000. It’s anyone’s game…

For the ninth day in a row, contestant number 1 has been on top as he has made over $170,000 since the start of the currency trading portion of the contest and ended Thursday with a portfolio balance of $270,401.36. He has been patiently holding on to a few long USD/JPY positions that he entered last week near 107.00, but given the broad consolidations we’ve seen in the forex markets over the past week, the pair has done nothing but range trade. Our leader had better hope his USD/JPY breakout to the upside comes soon, as the contestant with the second and third largest portfolio balances is right on his tails.

Indeed, the same contestant has two portfolios in the top 3, amounting to $264,960.09 and $263,470.86, though he is essentially making the same trades in both. Since the start of the contest, he has traded a wide variety of currency pairs, including EUR/USD, EUR/GBP, AUD/NZD, and GBP/CHF. However, it was a single long GBP/USD position that propelled him higher in the ranks, as he made over $45,000 on this trade.

Contestant number 2/3 bought GBP/USD on Tuesday morning just above 1.9500, a few hours after the release of Bank of England Governor Mervyn King’s letter to Chancellor of the Exchequer. Despite the fact that UK CPI rocketed to a fresh 16-year high, the British pound plunged across the board as Mr. King said that the path of future monetary policy was uncertain, suggesting that the jump in inflation pressures would not be enough to force the BOE to hike rates. Nevertheless, GBP/USD quickly recovered on Wednesday and Thursday as the minutes from the BOE’s June policy meeting revealed that some Monetary Policy Committee members considered increasing rates earlier this month, and as UK retail sales unexpectedly improved by the most since record-keeping began in January 1986.

Also noteworthy was the contestant with the largest percentage gain, as this trader’s portfolio made just over 36% in a single day. He did this primarily with a long GBP/CHF position he entered on Wednesday night and closed out on Thursday afternoon, netting him over $30,000. Like GBP/USD, GBP/CHF rocketed higher on bullish UK releases. However, it’s a good thing this trader got out of his GBP/CHF position when he did, as the pair has done nothing but plunge lower this morning thanks to surprisingly strong Swiss inflation figures. Indeed, Swiss producer and import price growth unexpectedly accelerated, suggesting that businesses will start to pass these increased costs onto consumers, which could lead Swiss CPI figures higher. The Swiss National Bank left rates steady at 2.75% on Thursday as they viewed inflation as being “transitory,” but if price pressures continue to mount, the SNB could switch to a more hawkish tone when they meet in Q3.

Congratulations to our top traders and good luck!

Terri Belkas, Currency Analyst for DailyFX.com