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.
Update: US consumer sentiment beats with 92.1
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 dropped sharply in September, slipping to 85.7 points, which was well off the estimate of 91.4 points. This was the indicator’s third consecutive decline. The markets are expecting a turnaround in the October release, with a forecast of 88.8 points.
Sentiments and levels
The euro took advantage of the dovish tone of the Fed minutes as well as the lack of urgency on the part of the ECB to increase QE. At the same time, the ECB is sensitive to the exchange rate and could play a different tune after the euro’s recent rise. In addition, the same factors that are worrying Fed policymakers, such as the Chinese slowdown and weakness in other emerging markets, have already hurt Germany, as seen in recent German data. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1535, 1.1460, 1.1373, 1.13, 1.1215 and 1.1113.
5 Scenarios
- Within expectations: 86.0 to 92.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 92.1 to 96.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 96.0: The chances of such a scenario are low. A second support line or more might be broken on such an outcome.
- Below expectations: 82.0 to 85.9: A poor reading could push the pair upwards, and one resistance level could be broken.
- Well below expectations: Below 82.0: 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.