Upbeat U.S. Consumer Confidence to Curb EUR/USD Rebound

Trading the News: U.S. Consumer Confidence

The Conference Board’s Consumer Confidence survey may spark a limited reaction as the headline reading is anticipated to hold steady at 128.0 in June, but another unexpected improvement in household sentiment may spark a bullish reaction in the U.S. dollar as it boosts the outlook for growth and inflation.

Positive data prints coming out of the U.S. economy should keep the Federal Open Market Committee (FOMC) on course to further normalize monetary policy as ‘the Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.’

As a result, the FOMC may continue prepare U.S. households and businesses for higher borrowing-cost at the next meeting on August 1, and the central bank may show a greater willingness to implement four rate-hikes in 2018 as ‘risks to the economic outlook appear roughly balanced.’

However, a dismal development may trigger a bearish reaction in the greenback as it drags on interest rate expectations, and the dollar may face a more bearish fate over the days should the figure dampen bets for a more aggressive hiking-cycle.

Impact that the U.S. Consumer Confidence survey has had on EUR/USD during the last print

April 2018 U.S. Consumer Confidence

EUR/USD 5-Minute Chart

U.S. Consumer Confidence unexpectedly improved in May, with the index climbing to 128.0 from a revised 125.6 the month prior, with the gauge for future expectations highlighting a similar dynamic as the figure increase to 105.6 from 104.3 during the same period.

Despite the limited reaction, EUR/USD edged lower throughout the day, with the pair slipping below the 1.1550 region to end the day at 1.1539. Learn more with the DailyFX Advanced Guide for Trading the News.

EUR/USD Daily Chart

• Broader outlook for EUR/USD remains tilted to the downside following the break of November-low (1.1586), with the pair at risk for further losses as both price and the Relative Strength Index (RSI) extend the bearish trends carried over from the previous month.
• Near-term support comes in around 1.1510 (38.2% expansion) with the next downside hurdle coming in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion).
• Keep in mind, the recent series of higher highs & lows may spur a test of trendline resistance, with EUR/USD at risk of staging a larger correction if it breaks/closes above the 1.1810 (61.8% retracement) region.

For more in-depth analysis, check out the Q2 Forecast for EUR/USD

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.