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Currency Trading Update

The leader board of the currency trading portion of the Million Dollar Portfolio Challenge saw a major shakeup by Thursday’s close, as one trader went from being contestant number 12 to contestant number 1 after closing a few extremely profitable long EUR/USD positions. In fact, the leader netted over $275,000 on seven trades executed over the past week or so, with the biggest winner being placed on 12/8 near 1.29, and closed yesterday morning - when EUR/USD topped - above 1.45. This has generally been the trend amongst the other contestants in the top 5 as of Thursday’s close, and makes sense as EUR/USD is easily the most popular pair in the currency trading portion of the contest.

The next two weeks will see little in the way of market-moving data, but here are the releases that may still be worth watching at the start of next week:

Asian Trading Session
12/22, 00:00 ET
Bank of Japan Monthly Report - On 12/19, the Bank of Japan unexpectedly cut rates by 20bps to 0.10% and increased monthly purchases of government bonds to 1.4 trillion yen from 1.2 trillion yen, which should effectively drive down yields. While BOJ Governor Masaaki Shirakawa has said that the bank isn’t planning on increasing the amount of government debt purchases any further, it is clear that they are very concerned about prospects for growth and the financial markets. The BOJ’s Monthly Report will be important to watch as a gauge of the fundamentals the bank is considering, as the report provides a comprehensive look at the economic indicators of the region.

European Trading Session
12/22, 02:00 ET
German Import Price Index - Germany’s import price index for the month of November is anticipated to drop for the fourth straight month at a rate of -2.5%, while the annual measure is anticipated to fall negative for the first time since August 2007. Given the broad drop in commodity prices, it will be unsurprising to see such declines and will suggest that the European Central Bank has room to cut rates further in 2009.

US Trading Session
12/22, 16:45 ET
New Zealand GDP - Upcoming GDP reports are anticipated to show that the New Zealand economy contracted for the third straight quarter during Q3, at a rate of -0.5%. This is anticipated to be the sharpest decline since Q2 2000 and worst recession since late 1997 - early 1998, as consumer spending falters and the housing sector slows. As it stand, Credit Suisse overnight index swaps are close to pricing in a 75bp cut by the Reserve Bank of New Zealand (RBNZ) on January 29, but if New Zealand GDP falls more than expected, speculation of aggressive rate cuts could rise and weigh on the New Zealand dollar.

Terri Belkas
Currency Strategist
Forex Capital Markets LLC

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