EUR/USD: Trading the University of Michigan Index – April

The University of Michigan Consumer Sentiment Index surveys consumer attitudes and expectations about the US economy. An increase in consumer confidence is a positive sign about the health of the economy and is bullish for the US dollar.

Update:  US Consumer Confidence beats at 95.9    

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on  Friday at 14:00 GMT.

Indicator Background

The  UoM Consumer Sentiment Index, which is released monthly, is an important leading economic indicator. It helps measure future spending behavior, and provides an indication of consumer confidence in the economy. Analysts look to the index to help answer that all-important question of “is the US consumer optimistic or pessimistic about the economy”?

The  index is currently on a downturn, having softened over the past two readings. In the March release, the index dipped to climbing to  91.2 points, well off the  forecast of 95.6 points.  The markets are expecting  better news in  the  April report, with an estimate of 93.8 points.  Will the indicator match or  beat this expectation?

Sentiments and levels

Although the euro has improved this week, the ECB continues meeting its money printing goals, which is weighing on the euro and sending money out of the old continent. US growth is expected to  be strong in  the spring, and evidence begins popping. So, the overall sentiment is  neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.10, 1.0910, 1.0760, 1.0615,  1.0550 and  1.0462.

5 Scenarios

1. Within expectations: 92.0 to 98.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 98.1 to 102.0: An unexpected higher reading can send the pair below one support level.
3. Well above expectations: Above 102.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
4. Below expectations: 88.0 to 91.9: A poor reading could push the pair upwards, and one resistance level could be broken.
5. Well below  expectations:  Below 88.0: A sharp  drop in consumer confidence would likely  hurt the dollar, and EUR/USD could break above  two or more resistance levels.

For more on the euro, see the  EUR/USD forecast.

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