– U. of Michigan Confidence to Improve for Second Time in 2014.
– Household Sentiment Survey Has Held Above 80.0 Since November.
Trading the News: U. of Michigan Confidence
A rebound in the U. of Michigan Confidence survey may spur a larger pullback in the EUR/USD as it raises the outlook for the U.S. economy.
What’s Expected:
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Why Is This Event Important:
Indeed, positive developments coming out of the world’s largest economy may put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later, but it seems as though Fed Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy as the central bank head continues to highlight the ongoing slack in the real economy.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Consumer Credit (FEB)
$14.000B
$16.489B
Durable Goods Orders (FEB)
0.8%
2.2%
Advance Retail Sales (MoM) (FEB)
0.2%
0.3%
The resilience in private sector consumption along with the pickup in consumer credit may generate a meaningful rebound in household sentiment, and an upbeat print may generate a bullish reaction in the USD as it limits the Fed’s scope to retain its highly accommodative policy stance for an extended period of time.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Non-Farm Payrolls (MAR)
200K
192K
Average Hourly Earnings (YoY) (MAR)
2.3%
2.1%
Pending Home Sales (MoM) (FEB)
0.2%
-0.8%
However, subdued wage growth paired with the persistent slack in the real economy may spark a further downturn in consumer confidence, and a dismal development may heighten the bearish sentiment surrounding the greenback as the FOMC retains a rather cautious outlook for the region.
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How To Trade This Event Risk(Video)
Bullish USD Trade: Household Sentiment Rises to 81.0 or Higher
Need to see red, five-minute candle following the release to consider a short trade on EUR/USD
If market reaction favors a long dollar trade, sell EUR/USD with two separate position
Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is hit; set reasonable limit
Bearish USD Trade: Consumer Confidence Survey Disappoints
Need green, five-minute candle to favor a long EUR/USD trade
Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Outlook Remains Bullish After Carving Higher Low around 1.3650-60
Break of Bearish Trend Favors Topside Targets as RSI Preserves Long-Term Upward Momentum
Interim Resistance: 1.3960-70 (61.8% expansion)
Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)
Impact that the U. of Michigan Confidence has had on EUR/USD during the last release
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
MAR P
2014
03/14/2014 13:55 GMT
82.0
79.9
+10
+3
March 2014 U. of Michigan Confidence Survey
The University of Michigan Confidence survey missed estimates last month to come in at 79.0 vs. 82.0 as surveyed by economists. The figure has been on the general decline since hitting a high over summer not seen since 2007. February’s reading led to a slight uptick in the EUR/USD, but small move did not hold into the close.
— Written by David Song, Currency Analyst and Gregory Marks
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx
