THE TAKEAWAY: [U. of Michigan Confidence increased to 73.8 in January] > [US consumers gain more confidence after adjusting their spendings according to the new payroll tax] > [USDJPY Bullish]

The Reuters/U of Michigan final index of U.S. consumer sentiment rose to 73.8 in January following a fall to 72.9 in December from the highest level in five years in November. The U. of Michigan Confidence Index is considered as one of the best leading indicators for future consumption. 62 economists for a survey polled by Bloomberg News had projected a gauge of 71.5 in January after the preliminary reading of 71.3.

In another report released earlier this week, the January Consumer confidence fell short of expectations due the raise of payroll tax. It shows that Americans are curbing their consumption as their after-tax incomes decrease. The U of Michigan report coming in today, however, indicates a more optimistic outlook on the consumption as US families are trying to adjust their spending according to the new tax rates.

USDJPY 1-minute Chart: February 1, 2013

Forex_U_of_Michigan_Confidence_Rose_USDJPY_Rallied_body_Picture_1.png, Forex: U. of Michigan Confidence Rose; USDJPY Rallied

Chart created using Market Scope – Prepared by Renee Mu

In the minute after the U of Michigan Confidence report was released, the USDJPY jumped to 92.05 yen from 91.98 yen and continued rallying due the bullish data in ISM Manufacturing and Construction Spending right following. At the time of this report writen , the USDJPY had appreciated to 92.36 yen.

--- Written by Renee Mu DailyFX Research