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Trading the News: U. of Michigan Confidence

Updates to the U. of Michigan Confidence survey may undermine the U.S. dollar strength following the Federal Reserve meeting as the index is expected to narrow to 97.9 from 98.6 in October.

Image of DailyFX economic calendar

Signs of waning household sentiment may push the Federal Reserve to adopt a less-hawkish tone as it casts a weakened outlook for private-sector consumption, one of the leading drivers of growth, and a dismal development may start to sway the monetary policy outlook as it dampens bets for above-neutral interest rates.

In turn, another downtick in the U. of Michigan survey may spark a bearish reaction in the U.S. dollar, but an unexpected improvement in consumer confidence may keep EUR/USD under pressure as it encourages the Federal Open Market Committee (FOMC) to further embark on its hiking-cycle over the coming months. Sign up and join DailyFX Currency Analyst David Song LIVEto cover the U. of Michigan survey.

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

OCT

2018

10/12/2018 14:00:00 GMT

100.5

99.0

+15

+13

October 2018 U. of Michigan Confidence

EUR/USD 5-Minute Chart

Image of eurusd 5-minute chart

The U. of Michigan Confidence survey unexpectedly weakened in October, with the index slipping to 99.0 from 100.1 the month prior. A deeper look at the report showed the gauge for future expectations also slipping to 89.1 from 90.5, while 12-month inflation expectations climbed to 2.8% from 2.7% during the same period.

The mixed developments spurred a mixed reaction in the dollar, with EUR/USD quickly bouncing back from the 1.1530 region to close the day at 1.1557. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of eurusd daily chart
  • Near-term outlook for EUR/USD remains capped by the 1.1810 (61.8% retracement) hurdle, with the exchange rate at risk of tracking the broad range carried over from the summer months as it snaps the series of higher highs & lows from earlier this week.
  • The failed attempt to push back above the 1.1510 (38.2% expansion) region brings the 2018-low (1.1301) back on the radar, with a break/close below 1.1290 (61.8% expansion) raising the risk for a move towards the 1.1220 (78.6% retracement) area.

For more in-depth analysis, check out the Q4 Forecast for EUR/USD

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.