Sentiment in the Forex Market: Indicators and Strategies to Profit from Crowd Behavior and Market Extremes

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16 SENTIMENT IN THE FOREX MARKET

June 2001, April 2003, May 2004, and September 2004. The only positive

difference, where the jobs created were far more than expected, was May

2004. Interestingly, May 2004 was a positive surprise of more than 188,000,

yet the DXY actually fell 1.91 percent that month. All of the other differ-

ences were negative surprises. In other words, the jobs created were far

less than expected. The conventional approach assumes that a negative

surprise is negative for the dollar so the DXY should fall during those

months. The dollar did fall in July 1999 (significant loss), April 2003, and

September 2004, but the dollar gained in November 1999 (significant gain),

August 2000 (significant gain), and June 2001 (not much of a gain). The

evidence indicates that the change in nonfarm payrolls, even changes that

deviate significantly from the consensus, has absolutely no effect on the

trend of the DXY.

GROSS DOMESTIC PRODUCT

Gross domestic product (GDP) is considered the “broadest, most com-

prehensive barometer available of a country’s overall economic condition.

GDP is the sum of the market values of all final goods and services pro-

duced in a country during a specific period using that country’s resources,

regardless of the ownership of the resources.”

7

GDP includes data on per-

sonal income