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
- 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.
- Above expectations: 100.1 to 104.0: A reading above the 100-point level could send the pair below one support level.
- 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.
- Below expectations: 89.0 to 92.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- 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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