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show that Eurozone inflation is falling well short of the ECB target of around 2%, and even these forecasts are already outdated.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
- 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.
- Above expectations: 94.1 to 98.0: An unexpected higher reading can send the pair below one support level.
- 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.
- Below expectations: 82.0 to 85.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- 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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