EUR/USD:Trading the University of Michigan Consumer Sentiment

2

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 critical for economic growth. Thus, a reading that is higher than predicted by the markets will be 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, 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 posted a reading of 74.3 In March, slightly below the market forecast of 75.8. The markets are predicting a rise in the index this month, with a forecast of 76.5, a level which has not been seen since 2008. Will the index meet or beat this rosy expectation?

Sentiments and levels

EUR/USD continues to be choppy. Reluctance by the FOMC to provide QE, the deepening recession in Europe (acknowledged by the central bank) and the worsening debt crisis in Europe certainly point to the dollar strengthening at the expense of the Euro. However, weak unemployment figures in the US jobs would affect growth and could hurt the greenback. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3360, 1.33, 1.3212, 1.3110, 1.30, and 1.2945.

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 84.1: If consumer sentiment is much stronger than forecast, this would be bullish for the dollar, and two or more support levels could fall.
  4. Below expectations: 68.0 to 71.9: A poor reading could push the pair upwards, and one resistance line could be broken.
  5. Well below expectations: Under 67.9: This scenario is unlikely. A severe loss in consumer confidence would hurt the dollar, and EUR/USD could break two or more resistance levels.

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

Get the 5 most predictable currency pairs

About Author

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.

2 Comments

  1. Pingback: EUR/USD Friday 13 – Falling from High Resistance Before Bernanke Closes the Week | Forex Crunch

  2. Pingback: EUR/USD Friday 13 – Falling from High Resistance Before Bernanke Closes the Week | Forex Information