USD/JPY – Trading the University of Michigan Consumer Sentiment

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The University of Michigan Consumer Sentiment 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 a reading that is higher than forecast is bullish for the US dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

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 had a poor showing in March, dropping from 76.3 points to 71.8 points. This was way off the estimate of 78.2 points. The markets are expecting a much better performance in the upcoming reading, with a forecast of 79.1 points. Will the index meet or beat this rosy prediction?

Sentiments and levels

USD/JPY continues to move higher, and is very close to the 100 level. The general direction of the pair will probably continue at an accelerated pace now, after the all important decision by the Bank of Japan. The pace that the BOJ expands its monetary base are significantly wider than those of the US, when compared to the GDP. In addition, the psychological impact of this huge step and the bond buys, which have already started, will probably cause some outflows out of Japan, that will strengthen other currencies against the yen. BOJ Governor Kuroda didn’t wait for the reappointment (which eventually happened after the decision) and gave all he had in the first meeting. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 101.44, 100, 98.90, 97.80 and 96.71.

5 Scenarios

  1. Within expectations: 75.0 to 83.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 83.1 to 87.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 87.0: The chances of such a scenario are low. Two or more resistance lines could be broken on such an outcome.
  4. Below expectations: 71.0 to 74.9: A weak reading could push down on the pair, and one support level could be broken.
  5. Well below expectations: Under 71.0: Another weak reading will likely hurt the dollar, and USD/JPY could break two or more support levels.

For more on the yen, see the USD/JPY forecast.

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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.

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