USD/JPY: Trading the UoM Consumer Sentiment Index

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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

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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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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