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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.

Update:  US consumer Confidence falls to 88.6 – USD lower

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 improved sharply in April, climbing to  95.9 points. This beat the estimate of 93.8 points.  The markets are expecting the upward trend to continue, with the estimate standing at 96.5 points. Will the indicator match or  beat this prediction?

Sentiments and levels

EUR/USD enjoyed  a run on the euro short-squeeze and  broad US  dollar weakness. Expectations  appear to have  been  overly optimistic for euro-zone growth in Q1,  so a disappointment cannot be ruled out and  the ECB’s QE program’s necessity will probably be reaffirmed. In the US, the  sentiment that Q2  will outperform a dismal Q1  continues to gain  ground. Continuing monetary policy divergence could be better reflected in the pair, and this would mean lower levels for the euro. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.15, 1.450, 1.1290, 1.12,  1.1050 and  1.0910.

 

5 Scenarios

  1. Within expectations: 93.0 to 100.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 100.1 to 104.0: A reading above  the 100-point level  could send the pair below one support level.
  3. Well above expectations: Above 104.0: The chances of such a scenario are low.  Two or more  support lines  could fall  on such an outcome.
  4. Below expectations: 89.0 to 92.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below  expectations:  Below 89.0: 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.

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