USD/JPY: Trading the US CB Consumer Confidence Index

The CB Consumer Confidence Index provides  important readings about consumer confidence and spending, which are critical for economic growth. A higher reading than the market forecast is bullish for the dollar.

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

Published on Tuesday at 14:00 GMT.

Indicator Background

Analysts carefully scrutinize  the  direction and rate of change  of the Consumer Confidence Index, looking  for an indication of which direction the economy is headed. As a key indicator, an unexpected reading can affect the direction of USD/JPY.

The index fell to 64.9 points in May, well below the market forecast of 69.8. The June reading calls for another drop, to 69.0 points. Given the host of  recent weak  US data, a figure below  the market estimate could  erode confidence in the US economy and hurt  the dollar.

Sentiments and levels

With QE3 in the US appearing very unlikely, and the debt and banking crisis in the Euro-zone having a lower impact  for the yen, there’s room for more rises after the pair crossed the 80 line. So, the overall sentiment is  bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 80.60, 80.20, 80, 79.70, 79 and 78.30.

5 Scenarios    

1. Within expectations: 66.0 to 72.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  72.1 to 75.0: An unexpected higher reading can send USD/JPY above one resistance lines.
3. Well above expectations: Above 75.0: Another sharp increase in consumer confidence could propel the pair above two or more resistance lines.
4. Below expectations: 63.0 to 65.9: A reading lower than forecast could send USD/JPY below one support level.
5. Well below expectations: Below 63.0:   A very weak reading would likely  push the pair  below two or more support levels.

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