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.
Update: US consumer confidence slides to 91.2 – USD pauses (for now
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Friday at 14:00 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 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 February, the index plunged to 93.6 points, compared to 98.2 points a month earlier. This marked a 3-month low. The markets are expecting better news in March, with the estimate standing at 95.6 points. Will the indicator match or beat this prediction?
Sentiments and levels
In the Eurozone, QE is commencing as planned and moving full steam ahead. Inflation and unemployment numbers have shown some improvement, but this hasn’t impressed the ECB. In the US, the ongoing strong jobs growth is positive and is likely to lead to a removal of forward guidance in the March 18th Fed meeting, so expectations have increased for a rate hike in June. The euro continues to struggle as parity is within sight. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.10, 1.0860, 1.0760, 1.05, and 1.00.
5 Scenarios
- Within expectations: 92.0 to 99.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 99.1 to 103.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 103.0: The chances of such a scenario are low. Two or more support levels could be broken on such an outcome.
- Below expectations: 99.0 to 102.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Below 99.0: A sharp drop in consumer confidence would likely hurt the dollar, and EUR/USD could break above two or more resistance levels.
- For more on the euro, see the EUR/USD forecast.
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