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.
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 90.7 points in January, short of the estimate of 92.6 points. This marked a 5-month low for the indicator. The markets are expecting the indicator to reverse directions and move higher in February, with an estimate of 92.1 points.
Sentiments and levels
The euro rallied late last week on Mario Draghi’s announcement that the ECB was not planning any further rate cuts. Even if more stimulus is unlikely, the effect of the measures announced should keep the euro rally limited. As expected, the Fed did not raise rates earlier this week, although we could see the Fed take action in mid-2016 if the economy shows signs of overheating. So, the overall sentiment is neutral on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1460, 1.1373, 1.13, 1.1220, 1.1140 and 1.1070.
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. Two or more support lines could 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.