Currency Trading Update

Contestants number 1 and 2 managed to hold on to their spots in the rankings of the currency trading portion of the Million Dollar Portfolio Challenge, but not without some losses. Contestant number 1's portfolio dropped below the $1 million mark to $949,608 as many of his EUR/USD trades went against him. This trader looks to be aiming to recoup his losses with multiple short EUR/USD positions, and his status in the top 5 likely hinges on where the currency pair goes from here.

Meanwhile, contestant number 2 is floating some hefty losses as he is still holding 6 long EUR/USD positions, but remained one of the leaders with a portfolio balance of $830,505.41 at Wednesday's close. As it stands, this morning's heavy volatility in the forex markets on the back of the European Central Bank's 50 basis point rate cut and subsequent comments from ECB President Trichet is likely to translate into a shake-up in the leader board by today's close.

Event risk will die down a bit as we close out the week:

Asian Trading Session
*No key indicators due to be released.

European Trading Session
01/16, 05:00 ET
Euro-zone Trade Balance (NOV) - The Euro-zone is trade balance is forecasted to reflect a deficit for the seventh straight month in November, and may even widen to -4.8 billion euros (seasonally adjusted) from -1.3 billion euros in October. Exports face especially large downside risks as slowing domestic and foreign growth limits demand for European goods. However, imports have been slowing as well, especially given the decline in energy costs, which could help to prevent the balance from plummeting more than anticipated. This isn't typically a major market-mover for the euro, barring significant deviations from forecasts, but is nevertheless worth watching as a measure of health in the Euro-zone's economy.

US Trading Session
01/16, 08:30 ET
US Consumer Price Index (DEC) - The release of the December reading of the US Consumer Price Index (CPI) could lead the term “deflation” to be used abundantly in coming weeks and months. Indeed, CPI is forecasted to have plunged 0.9 percent during December while the annual rate is anticipated to have fallen negative for the first time since 1955 by 0.2 percent. Excluding volatile food and energy prices, though, core CPI may have risen a slight 0.1 percent during the month, leaving the annual rate to edge down to a more than 4-year low of 1.9 percent from 2.0 percent. Overall, the news could weigh on the US dollar if CPI does indeed fall negative, but it may be more important to watch the impact of the data on investor sentiment, as increased risk aversion tends to benefit the US dollar and Japanese yen.

Terri Belkas
Currency Strategist
Forex Capital Markets LLC

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