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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  June release was a disappointment, as  the  indicator fell from 80.0 points to 76.8, well below the estimate of 82.6.  The markets are expecting a slight improvement, with an estimate of 77.2 points.

Sentiments and levels

ECB president Mario Draghi was relatively upbeat and didn’t hint about any upcoming easing, although inflation indicators continue to be subdued.  German data has been mixed while Italy, Spain and France continue to struggle.

In the US, politicians on both sides of  the divide have their  hands full with the shutdown and the looming debt ceiling, and the political crisis undoubtedly hurts the greenback.  As the shutdown continues,  the markets  are becoming more  edgy.  However, judging by previous fiscal crises that the US has  had to endure, there’s a good chance that the US will resolve its issues sooner than later, and most importantly, avoid an unimaginable default, which could have horrible consequences. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3710, 1.3570, 1.3460, 1.3325 and 1.3175.

5 Scenarios

  1. Within expectations: 74.0 to 80.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 80.1 to 84.0: An unexpected higher reading can send the pair below one support level.
  3. Well above  expectations: Above 84.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
  4. Below expectations: 70.0 to 73.9: A poor reading could push the pair upwards, and one  resistance level could be broken.
  5. Well below  expectations: Under 70.0: 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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