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The University of Michigan Consumer Sentiment Index surveys consumer attitudes and expectations about the US economy. A reading that is stronger than expected 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 indicator remains at high levels, but did drop below the key 80-point level in February, coming in at 79.9 points. This fell short of the estimate of 81.9 points. The markets are expecting a stronger reading in March, with the estimate standing at 81.2 points. Will the market meet or beat this rosy prediction?

Sentiments and levels

The  dreaded sales tax hike  kicked in last week and is expected to weigh on the fragile Japanese economy. The BOJ  has said it  has no plans to increase stimulus before July, but  it could  be forced to act  earlier if  the economy takes a downturn.  In the US, it seems that the economy  has been  picking up in the spring, thus making Yellen’s hawkish comment more powerful than her dovish ones. The dollar dipped after Nonfarm Payrolls missed the estimate last month, but the key indicator did show a strong improvement compared to the  previous release.  If US employment numbers remain solid, there is  room for  the greenback  to move higher. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 104.10, 102.74, 101.20, 100,  0.9957 and 0.9897.

5 Scenarios

  1. Within expectations: 78.0 to 84.0: In such a case, USD/JPY is likely to rise within range, with  a small chance of breaking higher.
  2. Above expectations: 84.1 to 88.0: An unexpected higher reading can send the pair  above  one  resistance line.
  3. Well above  expectations: Above 88.0: The chances of such a scenario are low. A second  resistance line  could be broken on such an outcome.
  4. Below expectations: 74.0 to 77.9: A poor reading could push the pair upwards, and one  support line could be broken.
  5. Well below  expectations: Under 74.0:  In this scenario, we could USD/JPY below a second support  level.

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

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