The University of Michigan Consumer Sentiment Index surveys consumer attitudes and expectations about the US economy. A reading that is stronger than expected is bullish for the US dollar.
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 indicator remains at high levels, but did drop below the key 80-point level in February, coming in at 79.9 points. This fell short of the estimate of 81.9 points. The markets are expecting a stronger reading in March, with the estimate standing at 81.2 points. Will the market meet or beat this rosy prediction?
Sentiments and levels
The dreaded sales tax hike kicked in last week and is expected to weigh on the fragile Japanese economy. The BOJ has said it has no plans to increase stimulus before July, but it could be forced to act earlier if the economy takes a downturn. In the US, it seems that the economy has been picking up in the spring, thus making Yellen’s hawkish comment more powerful than her dovish ones. The dollar dipped after Nonfarm Payrolls missed the estimate last month, but the key indicator did show a strong improvement compared to the previous release. If US employment numbers remain solid, there is room for the greenback to move higher. So, the overall sentiment is bullish on USD/JPY towards this release.
Technical levels, from top to bottom: 104.10, 102.74, 101.20, 100, 0.9957 and 0.9897.
5 Scenarios
Within expectations: 78.0 to 84.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
Above expectations: 84.1 to 88.0: An unexpected higher reading can send the pair above one resistance line.
Well above expectations: Above 88.0: The chances of such a scenario are low. A second resistance line could be broken on such an outcome.
Below expectations: 74.0 to 77.9: A poor reading could push the pair upwards, and one support line could be broken.
Well below expectations: Under 74.0: In this scenario, we could USD/JPY below a second support level.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
AUD/USD: A tough barrier remains around 0.6800
AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.
EUR/USD still targets the 2024 peaks around 1.1200
EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.
Gold surrenders gains and drops to weekly lows near $2,550
Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.
Ethereum could rally to $2,817 following Fed's 50 bps rate cut
Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.
UK CPI set to grow at stable 2.2% in August ahead of BoE meeting
The United Kingdom Office for National Statistics will release August Consumer Price Index figures on Wednesday. Inflation, as measured by the CPI, is one of the main factors on which the Bank of England bases its monetary policy decision, meaning the data is considered a major mover of the Pound Sterling.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.