EUR/USD: Trading the UOM Sentiment Index Jan 2016

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.

Published on  Friday at 15:00 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 remains at very high levels, although it did dip in November to 91.8 points, shy of the estimate of 92.3 points. The markets are expecting an improvement in December, with a forecast of 92.7 points.

Sentiments and levels

The euro remains under pressure, and the ECB minutes and upcoming ECB meeting could continue to weigh on the currency. However, a number of recent Eurozone indicators have pointed to stronger growth, particularly in Germany, the bloc’s locomotive and largest economy.  So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1140, 1.1050, 1.10, 1.0850,  1.08 and  1.0710.

5 Scenarios

1. Within expectations: 89.0 to 96.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 96.1 to 100.0: An unexpected higher reading can send the pair below one support level.
3. Well above expectations: Above 100.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
4. Below expectations: 92.0 to 95.9: A reading short of the estimate could push the pair upwards, and one resistance level could be broken.
5. Well below  expectations:  Below 92.0: A poor reading could see EUR/USD break above two or more resistance lines.

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