USD/JPY: Trading the UoM Consumer Sentiment Index

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

UoM Consumer Sentiment, which is released monthly, is an important leading economic indicator. It helps measure consumer confidence, which usually translates into consumer spending,  a key component of economic growth. Analysts look to the index to help answer the  critical question of “is the US consumer optimistic or pessimistic about the economy?”

The indicator remains at high levels and has been above the 80-point line since April. The index was almost unchanged last month, coming in at 81.3 points. However, the markets had expected more, with an estimate of 83.5. Another strong release is expected, with the estimate standing at 82.7 points. Will the indicator follow suit and meet or beat this rosy prediction?

Sentiments and levels

Geopolitical hotspots in  Ukraine, Gaza and Iraq  have boosted the  yen and the currency has taken advantage of weaker US yields. On the other hand, the improving US economy and the recent weakness in the Japanese economy  support the pair. With the current proximity to 102, we can expect trading to stick  close to  this level. So, the overall sentiment is  neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 103, 102.70, 102.30, 102,  101.10 and 100.75.

5 Scenarios

1. Within expectations: 79.0 to 87.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 87.1 to 91.0: An unexpected higher reading can send the pair  above  one  resistance line.
3. Well above  expectations: Above 91.0: The chances of such a scenario are low. A second  resistance line  could be broken on such an outcome.
4. Below expectations: 75.0 to 78.9: A poor reading could push the pair upwards, and one  support line could be broken.
5. Well below  expectations:  Below 75.0:  In this scenario, USD/JPY could break below a second support  level.

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

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