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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, as consumer spending is a critical component of economic growth.  Thus, a reading that is higher than predicted by the markets  is bullish for the 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, released monthly, is an important leading economic indicator. It helps measure future consumer spending behavior, and provides an indication of consumer confidence in the economy. Analysts look to the index to help answer the basic, yet crucial question of “is the American consumer optimistic or pessimistic about the economy?”

The February  reading came in at 72.5, within the market expectation of 74.4. The forecast for March  is for an increase to 75.7. If the indicator can meet or beat this forecast, this would be its highest reading in over four years.

Sentiments and levels

The Greek debt crisis continues to linger, although things may stabilize for now. In the US, there is little chance of any major shift in monetary policy. So, the overall sentiment on EUR/USD has turned from bearish to neutral towards this release.

Technical levels, from top to bottom: 1.3333, 1.3212, 1.3150, 1.3050, 1.30, 1.2945 and 1.2873.

5 Scenarios

  1. Within expectations:  72.0 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.  EUR/USD could break two or more support levels  on such an outcome.
  4. Below expectations:  68.0 to 71.9: A poor reading could push the pair upwards, and one  resistance level could be broken.
  5. Well below expectations: Under 68.0: A severe loss in consumer confidence will hurt the dollar, and  EUR/USD could  push above  two or more  resistance levels.

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