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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 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 13:55 GMT.

Indicator Background

The University of Michigan 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 the all-important question of “is the US consumer optimistic or pessimistic about the economy”?

The  January release improved to 81.2 points, up from 80.4 a month earlier. This beat the estimate of 80.6 points.  The markets are expecting the upward trend to continue, with the estimate  standing at  81.9 points. Will the indicator  meet or beat  this prediction?

Sentiments and levels


The lack of any moves by the ECB and its forecasts 2016 leave little room for doubt: the ECB is not really concerned with the low level of inflation. A negative deposit rate has been bandied about, but it’s a safe bet that the ECB will not take such a step. Last week, ECB head Draghi sounded optimistic, stating that the Eurozone recovery continues at a modest clip. This means  that there is room for more euro appreciation before deflation worries return.

In the US, employment numbers have been up and down, but the better than expected NFP confirmed the taper  when the Fed meets next week. Also the technical look seems quite bullish, as the key 1.40 level is within striking distance. So, the overall sentiment is  bullish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.4307, 1.4149, 1.40, 1.3940, 1.3895, 1.3830.

5 Scenarios

  1. Within expectations:  80.0 to 84.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 84.1 to 87.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 87.0: The chances of such a scenario are low. A second support line  might be broken on such an outcome.
  4. Below expectations: 77.0 to 79.9: A poor reading could push the pair upwards, and one  resistance level could be broken.
  5. Well below  expectations: Under 77.0: A sharp  drop in consumer confidence would likely hurt  the  dollar, and EUR/USD could break a second resistance level.

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

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