EUR/USD: Trading the UoM Consumer Index – Sep. 2015

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.

Update:  US consumer confidence misses with 85.7

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”?

The  index  slipped to  92.9 points in  August, short of  the estimate of 93.5 points.  This marked a 3-month low for the indicator. The downward trend  is  expected to  continue in the September report, with the estimate standing at 91.8 points.

Sentiments and levels

As we wrote last week,  the ECB also joined the currency wars, as Draghi  indicated he was willing to act if necessary.  With additional  QE looking likely, the euro could face significant  downwards pressure from the ECB, even if the Fed  does not pull the rate trigger in  the immediate future.  In our opinion, there is a good chance of a “dovish rate hike”. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1373, 1.13, 1.1215, 1.1113,  1.1050 and  1.0950.

5 Scenarios

1. Within expectations: 89.0 to 95.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 95.1 to 99.0: An unexpected higher reading can send the pair below one support level.
3. Well above expectations: Above 99.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
4. Below expectations: 85.0 to 88.9: A poor reading could push the pair upwards, and one resistance level could be broken.
5. Well below  expectations:  Below 85.0: 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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