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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 can help strengthen the US 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, 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  June release was a disappointment, as  the  indicator fell from 83.7 points to 82.7, well below the estimate of 84.9.  The markets are expecting some improvement in the upcoming release, with an estimate of 85.3 points. Will the indicator bounce back and beat this rosy prediction?

Sentiments and levels

The euro has had a very tough time since mid-June, dropping from the 1.34 level to under 1.28 in a matter of several weeks. The euro has received no help from ECB head Mario Draghi  and other ECB policymakers, who continue to reiterate that  Eurozone growth is weak and that the door remains open to further rate cuts, even though the current rate stands at a record low of 0.50%.  The crises in Portugal and uneasiness over the Greek bailout  are also weighing on the euro. The huge gains by the euro on Wednesday after the inconclusive Fed minutes  are more reflective of a broadly weaker dollar, rather than any newfound strength from the euro. US employment numbers are likely the key as to whether the Federal Reserve will taper QE; if employment data continues to improve, we could see more Fed policymakers tilt towards scaling back QE, which would be dollar-positive. So, the overall sentiment  remains  bearish on EUR/USD towards this release.

 

Technical levels, from top to bottom: 1.3160, 1.31, 1.3050, 1.30, 1.2940, 1.2890.

5 Scenarios

  1. Within expectations: 82.0 to 88.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 88.1 to 92.1: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 92.1: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
  4. Below expectations: 78.0 to 81.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below  expectations: Under 78.0: A sharp  drop in consumer confidence will  hurt the dollar, and EUR/USD could break two or more resistance levels.

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

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