EUR/USD: Trading the UOM Sentiment Index Oct 2011

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 can help strengthen the US dollar.

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

Published on Friday at 13:55 GMT.

Indicator Background

The University of Michigan 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 figures for the previous release came in at 57.8, almost identical to the forecast. October’s forecast predicts a reading of 60.2, which indicates that the market is expecting some improvement in consumer confidence.

Sentiments and levels

The Greek debt crisis seems to have eased slightly, with discussions of an orderly default in November. Economic fundamentals continue to be sluggish in both the Euro Zone and the US. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3950, 1.38, 1.37, 1.3630, 1.3550, 1.3450 and 1.3430.

5 Scenarios

  1. Within expectations: 55.0 to 65.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 65.1 to 70.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 70.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
  4. Below expectations: 50.0 to 54.9: A poor reading could push the pair upwards, and one resistance level could be broken.
  5. Well below expectations: Under 50.0: A severe loss in consumer confidence will hurt the dollar, and EUR/USD could break two or more resistance levels.

For more on the Euro, see the EUR/USD.

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