EUR/USD: Trading the UoM Consumer Sentiment June 2012

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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 and strength of the economy. A reading which is higher than the market forecast is bullish for the US dollar.

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

Published on Friday at 12:30 GMT.

Indicator Background

The University of Michigan Consumer Sentiment Index, 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 posted a reading of 77.8 points, exceeding the market forecast of 76.4. It was the first time since January the index was higher than the market estimate. The forecast for the June reading is almost unchanged, with a prediction of 77.5. However, some recent US data has been weak. Will this month’s consumer sentiment disappoint the markets?

Following weeks of rumors and denials, Spain has finally received a bailout. After some initial euphoria, however, the markets have been lukewarm about the announcement.  All eyes are on Sunday’s Greek election, with Greece’s continued participation in the Euro-zone at stake. This could be the calm before the storm.  So, the sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2660, 1.2623, 1.2587, 1.2540, 1.2460, 1.24 and 1.2286.

5 Scenarios

  1. Within expectations: 73.0 to 81.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 81.1 to 85.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 85.0: The chances of such a scenario are low. Two or support levels could be broken on such an outcome.
  4. Below expectations: 69.0 to 72.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below expectations: Under 69.0: A severe loss 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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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.