The University of Michigan Consumer Sentiment Index surveys consumer attitudes and expectations about the US economy. Consumer confidence leads to more spending, which is an critical component in economic growth.
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?”.
UoM Consumer Sentiment sparkled in the May release, climbing to a six-month high. The indicator came in at 83.7 points, well above the estimate of 77.9 points. The markets are expecting an even better release, with an estimate of 84.9 points. Will the indicator meet or beat this rosy prediction?
Sentiments and levels
With the ECB rate announcement out of the way, the markets can again focus on the Eurozone economy, which has plenty of troubles. While things aren’t that bad in Spain, Germany is sending out mixed messages, and is not serving as engine for the rest of the Eurozone. France and Italy continue to limp along. Also, the ECB actually downgraded its forecasts which could drive away investors and hurt the euro.
In the US, Non-Farm Payrolls provided a relief after mediocre data, earlier in the week. In general, the slow and steady recovery continues, with some bumps along the way. While tapering of QE will not happen very soon, it is more likely that the Fed will reduce rather than increase bond buys. The euro has enjoyed a strong month, but will need more solid releases to consolidated these gains. So, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3480, 1.3434, 1.3350, 1.3306, 1.3255 and 1.32.
5 Scenarios
- Within expectations: 80.0 to 88.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 88.1 to 92.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 92.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
- Below expectations: 76.0 to 79.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Below 76.0: A sharp drop in consumer confidence will likely hurt the dollar, and EUR/USD could break two or more resistance levels.
For more on the Euro, see the EUR/USD forecast.
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