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, as consumer spending is a critical component of economic growth. Thus, a reading that is higher than predicted by the markets is bullish for the dollar.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Friday at 13:55 GMT.
Indicator Background
The University of Michigan Consumer Sentiment Index, released monthly, is an important leading economic indicator. It helps measure future consumer spending behavior, and provides an indication of consumer confidence in the economy. Analysts look to the index to help answer the basic, yet crucial question of “is the American consumer optimistic or pessimistic about the economy?”
The February reading came in at 72.5, within the market expectation of 74.4. The forecast for March is for an increase to 75.7. If the indicator can meet or beat this forecast, this would be its highest reading in over four years.
Sentiments and levels
The Greek debt crisis continues to linger, although things may stabilize for now. In the US, there is little chance of any major shift in monetary policy. So, the overall sentiment on EUR/USD has turned from bearish to neutral towards this release.
Technical levels, from top to bottom: 1.3333, 1.3212, 1.3150, 1.3050, 1.30, 1.2945 and 1.2873.
5 Scenarios
- Within expectations: 72.0 to 80.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 80.1 to 84.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 84.0: The chances of such a scenario are low. EUR/USD could break two or more support levels on such an outcome.
- Below expectations: 68.0 to 71.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Under 68.0: A severe loss in consumer confidence will hurt the dollar, and EUR/USD could push above two or more resistance levels.
For more on the euro, see the EUR/USD forecast.