EUR/USD: Trading the UoM Consumer Sentiment Index

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.

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 the level of optimism of the US consumer. The indicator is closely watched by analysts, as consumer confidence is closely linked to consumer spending, a key driver of economic growth.

The  index improved slightly to 90.4 points in August, but this fell short of the estimate of 91.5 points. The upward trend is expected to continue in September, with a reading of 91.0 points.

Sentiments and levels

The ECB remains far from achieving its inflation target, and keeping pressure on the euro is essential to pushing inflation upwards. The bank is reluctant to act , but hinting at further easing could serve to tilt to the euro down. It’s the opposite story with the Fed, which is moving in the direction of a rate hike, although the timing is very much up in the air.  So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1375, 1.1335, 1.1230, 1.1190, 1.1125 and 1.1070

5 Scenarios

1. Within expectations: 88.0 to 94.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 94.1 to 98.0: An unexpected higher reading can send the pair below one support level.
3. Well above expectations: Above 98.0: The chances of such a scenario are low.  Two or more  support lines  could be broken on such an outcome.
4. Below expectations: 84.0 to 87.9: A poor reading could push the pair upwards, and one resistance level could be broken.
5. Well below  expectations:  Below 84.0: 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 EUD/USD forecast.