EUR/USD: Trading the University of Michigan Consumer Sentiment Index

EUR/USD: Trading the University of Michigan Consumer Sentiment Index

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 14:00 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  slipped to  90.0 points in February, well short of  the estimate of 92.1 points.  This marked a 6-month low for the indicator. The  markets are expecting the indicator to reverse directions and move  higher in March, with  an estimate of 91.9 points.

Sentiments and levels

The Eurozone remains mired  in weak  inflation and growth levels, so the ECB could step in with more easing measures in an attempt to kick-start the economy. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1460, 1.1365, 1.13, 1.1220,  1.1140 and  1.1070.

5 Scenarios

  1. Within expectations: 89.0 to 95.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 95.1 to 99.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 99.0: The chances of such a scenario are low.  Two or more  support lines  could be broken on such an outcome.
  4. Below expectations: 84.0 to 88.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below  expectations:  Below 83.9: A sharp  drop in consumer confidence would likely  hurt the dollar, and EUR/USD could break above  two or more resistance levels.

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

Kenny Fisher

Kenny Fisher

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.