Maybe the keywords you are competing got knocked out. Check your keywords again.
Or maybe your backlinks got deleted. Check them too.
And yeah, link exchange can hurt your SE too.
Link exchanges are just bad news. You need to look at your site's statistics and analyze where your traffic was coming from. If the dry up is search engine traffic, then you need to do some SEO
By the way, there was another google update recently, i think a week ago.
