The Fed hasn’t stopped beating the dead horse repeatedly saying that future interest rate decisions will be dependent on incoming economic data. What this really means is they don’t what the heck they will do at the next FOMC meeting yet, so they need chill first and look at recent data, and hopefully they’ll come up with something before the meeting starts.
I’ve created a fool-proof holy-grail-type formula on how to profit on the Fed’s current behavior. This took me years to develop and has been super duper top secret until now:
- If US economic data is good (yah), then the market will assume that the Fed will continue to raise interest rates, which would strengthen the dollar.
- If US economic data comes out bad (boo), then the market will assume that the Fed is done raising interest rates, which would further weaken the dollar.
If you had applied this simple-as-pie get-rich-quick formula to last week’s data, you would’ve hit the jackpot. Let’s take a look.
ISM Manufacturing Index
The May level came out at 54.5, a 9 month low for the index.
The decline in the ISM manufacturing index was larger than expected. Very bad. This resulted in huge moves in the market. The chart below shows how many pips each currency pair moved after one hour after the ISM index was released.
The GBP/USD moved a ginormous 111 pips in one hour! I should have bet the whole farm and bought this pair right before ISM came out. Too bad I only bet half the farm.
Nonfarm payrolls increased by 75,000 in May, lower than the 180,000 expected. This was the smallest monthly job gain since Hurricane Katrina last October.
The 75,000 number was off market expectation by a whooping 58%! Super bad. I’m surprised the dollar sell-off wasn’t bigger.
As you just witnessed, my formula works like gangbusters. You’ll be a millionaire within a week! Feel free to spread the word on this super duper top secret formula.