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University of Michigan Consumer Sentiment 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 rises to 93.8 – USD stronger

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

Published on  Friday at 14:55 GMT.

Indicator Background

University of Michigan Consumer Sentiment 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”?

In November, the  index  rose for a straight third month,  climbing to 89.4 points.  This beat the estimate of 87.3 points. The markets are expecting another strong reading for December, with an estimate of 89.6 points.

Sentiments and levels

Current inflation forecasts show that Eurozone inflation  is falling well short of  the ECB  target of around 2%, and even these forecasts are already outdated. While  Draghi continues to adopt a “wait and see” attitude towards  QE,  another weak  TLTRO  earlier on Thursday puts more pressure on the  ECB to tap the sovereign bond market if it wants to  expand its balance sheet.

In the US, we had an excellent jobs report and some wage inflation last week. While this  could be a one-time  bump up, even a return to previous job advances keeps the Fed firmly on  schedule to raising rates.  At the same time, the ECB is moving in  the opposite direction as it considers QE. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2660, 1.2570, 1.25, 1.2450, 1.2360  and 1.2280.

5 Scenarios

  1. Within expectations: 86.0 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. A second support line or more might be broken on such an outcome.
  4. Below expectations: 82.0 to 85.9: A poor reading could push the pair upwards, and one  resistance level could be broken.
  5. Well below  expectations:  Below 82.0: 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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