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

The  index has been trading  at high levels, with two straight readings above the 80-point level. However, the previous reading of 81.8 points  fell short of the estimate of 84.7 points.  The markets are expecting another strong release, with the estimate standing at 83.2 points. Will the indicator follow through with another sharp release?

Sentiments and levels

The ECB finally  pulled the trigger last  week, cutting the  benchmark rate to a record low and  introducing negative deposit rates for the first time. The euro has been under broad pressure as a result and could lose ground.  On the other hand, the positive economic signs from Germany could keep the euro strong.  In the US, market sentiment is positive, with recent employment numbers meeting expectations.  So, the overall sentiment is  neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3677, 1.3650, 1.3585, 1.35,  1.3450 and  1.34.


5 Scenarios

  1. Within expectations: 80.0 to 86.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 86.1 to 89.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 89.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
  4. Below expectations: 77.0 to 79.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below  expectations:  Below 77.0: A sharp  drop 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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