When is the Michigan Consumer Sentiment Index and how could it affect EUR/USD?

Michigan Consumer Sentiment Index Overview

Friday's US economic docket highlights the release of the University of Michigan's Consumer Sentiment Index, due later during the US session at 14:00 GMT. The preliminary reading is expected to show that the index rose to 72.2 in September from 70.3 in the previous month. The data will provide fresh clues about the outlook for the US economy ahead of the critical FOMC monetary policy meeting on 20-21.

Joseph Trevisani, Senior Analyst at FXStreet offered his take on the report and explained: “The prospect of 3%-4% core inflation and  4%-5% headline CPI for the next six months or a year, is likely to have a greater negative impact on consumer optimism and spending than any number of open jobs. The persistence of the Delta variant is also taking an unknown toll on consumer confidence.  Although case and hospitalization rates have begun to decline, the possibility of yet another wave remains to depress outlook. It will take many months for this drag to wholly dissipate.”

How Could it Affect EUR/USD?

Against the backdrop of Thursday's upbeat US Retail Sales data, which pointed to the continuation of economic recovery, a stronger print will further underscore consumer confidence. This would reinforce market expectations about an imminent Fed taper announcement and add fuel to the recent US dollar rally to three-week tops.

Conversely, a softer reading might weigh on the greenback, though the immediate market reaction is likely to be short-lived ahead of next week's key central bank event risk. This, in turn, suggests that the path of least resistance for the EUR/USD remains to the downside and any further uptick from current levels is more likely to run out of steam rather quickly.

Meanwhile, Yohay Elam offered a brief technical outlook for the EUR/USD pair: “The Relative Strength Index on the four-hour chart is above 30, thus outside oversold conditions. Momentum is to the downside and the pair's recent stabilization has still left it under the 50, 100 and 200 Simple Moving Averages. Overall, bears are in the lead.”

Yohay also provided some important technical levels to trade the major: “Support awaits at Thursday's low of 1.1750, followed by 1.1735 and then by 1.1705. Resistance is at 1.18, which provided support in recent days. It is followed by 1.1845, a swing high, and then by 1.1885.”

Key Notes

 •  US Michigan Consumer Sentiment Preview: Markets will have to look hard for positive signs

 •  EUR/USD Forecast: Dead cat bounce or turnaround? Consumer confidence and “witching” eyed

 •  EUR/USD Price Analysis: Further losses to 1.1700 stay on the table

About Michigan Consumer Sentiment Index

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.