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The University of Michigan Consumer Sentiment Index surveys consumer attitudes and expectations about the US economy.  A reading which is  higher  than the forecast is bullish  for  the US 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 July release came in at 80.0 points. Although a strong reading, this was  lower than the July reading of 83.0 points, and way off the estimate of 85.6.  The estimate for the August release stands at 82.6 points.

Sentiments and levels

The euro is getting no love from the ECB: with increasing talk of a rate cut, the central bank is weighing on the pair. In addition, a  third bailout for Greece seems inevitable  and German, Italian and Eurozone Industrial Production has slipped.

Despite the big disappointment in the Non-Farm Payrolls, (especially in the participation rate), hints from the Fed points to tapering. The Fed could ease into reduction in bond-buying  with a reduction of, say  $15 billion. Tapering is not fully priced in yet. In order to hold back on tapering, perhaps only a big escalation is Syria is needed. So, the overall sentiment is bearish on  EUR/USD towards this release.

Technical levels, from top to bottom: 1.3520, 1.3415, 1.33, 1.3240, 1.3100 and 1.3050.

5 Scenarios

  1. Within expectations: 79.0 to 86.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 86.1 to 90.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 90.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
  4. Below expectations: 75.0 to 78.9: A poor reading could push the pair upwards, and one   resistance level could be broken.
  5. Well below expectations: Under 75.0: A sharp  drop in consumer confidence will likely  the dollar, and EUR/USD could break two resistance levels.

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

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