The University of Michigan Consumer Sentiment Index 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 is bullish for the US dollar.
Here are all the details, and 5 possible outcomes for EUR/USD.
Update: US consumer confidence misses with 85.7
Published on Friday at 14:00 GMT.
Indicator Background
The UoM 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 slipped to 92.9 points in August, short of the estimate of 93.5 points. This marked a 3-month low for the indicator. The downward trend is expected to continue in the September report, with the estimate standing at 91.8 points.
Sentiments and levels
As we wrote last week, the ECB also joined the currency wars, as Draghi indicated he was willing to act if necessary. With additional QE looking likely, the euro could face significant downwards pressure from the ECB, even if the Fed does not pull the rate trigger in the immediate future. In our opinion, there is a good chance of a “dovish rate hike”. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1373, 1.13, 1.1215, 1.1113, 1.1050 and 1.0950.
5 Scenarios
- Within expectations: 89.0 to 95.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 95.1 to 99.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 99.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
- Below expectations: 85.0 to 88.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Below 85.0: A sharp drop in consumer confidence would likely hurt the dollar, and EUR/USD could break above two or more resistance levels.
For more on the euro, see the EUR/USD.
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