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: 94.6 – above expectations
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Friday at 14:00 GMT.
Indicator Background
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 took an unexpected plunge in May, slipping to 88.6 points, compared to an estimate of 95.8 points. This marked the first time that the index has fallen below the 90-point level since November. However, the markets are expecting a rebound in the June report, with an estimate of 91.3 points.
Sentiments and levels
EUR/USD has rallied this week, boosted by the fact that the ECB is not accelerating its bond buys. Still, the US economy is easily outperforming that of the Eurozone, as underscored by last week’s excellent NFP. The bigger picture is monetary policy divergence. The Federal Reserve is likely to press the trigger and raise rates in September 2015 while the ECB is not expected to stop printing euros until September 2016. With the Fed and ECB moving in opposite directions, the euro will remain under pressure. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1450, 1.1373, 1.1290, 1.1190, 1.1113, 1.1050.
5 Scenarios
- Within expectations: 88.0 to 94.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 94.1 to 98.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 98.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
- Below expectations: 84.0 to 87.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Below 84.0: 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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