EUR/USD: Trading the UoM Consumer Sentiment

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 15:00 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 sparkled in December, climbing to 98.0, its highest level since December 2014. This easily beat the estimate of 94.3. The upward trend is expected to continue in January, with a reading of 98.6.

Sentiments and levels

The US dollar has recorded broad losses following Donald Trump’s press conference, which disappointed the markets. At the same time, monetary divergence favors the US dollar as a strong US economy could lead to further rate hikes from the Federal Reserve.  So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.0985, 1.0873, 1.0710, 1.0615, 1.0570 and 1.0520

5 Scenarios

1. Within expectations: 95.0 to 102.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 102.1 to 106.0: An unexpected higher reading can send the pair below one support level.
3. Well above expectations: Above 106.0: The chances of such a scenario are low.  Two or more  support lines  could be broken on such an outcome.
4. Below expectations: 91.0 to 94.9: A weak reading could push the pair upwards, and one resistance level could be broken.
5. Well below  expectations:  Below 91.0: In this scenario, EUR/USD could break above  two or more resistance levels.

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