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US Dollar Weakness Throws Leaders For A Loop

Contestant number 1 continued to hold on to his top spot with a portfolio balance of $320,971.11 on Thursday, as he aggressively traded EUR/USD. In fact, currency traders in the contest made the most by trading this pair on Thursday, followed by EUR/JPY and GBP/JPY. However, contestant number 1 only made $5,320 on a total of 63 trades, down from nearly $61,000 in profits on Wednesday. Indeed, US dollar price action was volatile across the majors as the currency fell despite improvements in US economic data. With risk aversion appearing to make a comeback in the markets, the US dollar is at a major disadvantage when this sort of sentiment takes hold. Furthermore, given the sharp moves we saw across the majors on Thursday, most currency pairs will likely consolidate over the course of Friday. For example, the US dollar strengthened only marginally this morning despite a 1.9% surge in personal income and 0.8% jump in personal spending. The former got a boost as consumers received their cash rebate checks, but their purchases were directed more towards staple products like food and gasoline, suggesting Americans are feeling the squeeze of higher prices and will cut back spending on discretionary products in the future.

Meanwhile, contestant number 2 held on to his spot as well, ending Thursday with a balance of $282,161.42 as he made nearly $12,000 in net profits on two long EUR/JPY trades. Contestant number 2 managed to exit these positions before the pair tumbled on Thursday afternoon, and now, he is taking the other side of the trade by shorting a different Japanese yen cross: AUD/JPY. Due the high yield associated with the Australian dollar (7.25%), this pair is prone to a significant amount of volatility and as a result, is a risky trade whether you are buying or selling it. Contestant number 2 sold AUD/JPY early this morning near 102.50 and appears to be looking for a continuation of the pair’s sharp 150+ pip drop on Thursday. However, given the extent of that move, contestant number 2’s balance may be little changed by Friday’s close, as the pair may simply consolidate above support at 102.00 for the rest of the day.

Likewise, contestant number 3 has gone on to trade the Japanese yen crosses, primarily using EUR/JPY. He ended Thursday with a balance of $274,703.66, as his short EUR/JPY trades allowed him to catch yesterday afternoon’s entire drop. As a result of this trade, contestant number 3 netted nearly $5,000. However, he is currently holding on to two losing positions: short GBP/USD and long USD/JPY. Indeed, with the US dollar remaining weak across the majors, his floating losses could weigh on his overall portfolio balance by tonight’s close and leave the door open for other traders to enter the top 3.

Congratulations to our top traders and good luck!

Terri Belkas, Currency Analyst for DailyFX.com