- 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
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Need to see red, five-minute candle following the release to consider a short trade on EUR/USD
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If market reaction favors a long dollar trade, sell EUR/USD with two separate position
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Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
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Move stop to entry on remaining position once initial target is hit; set reasonable limit
Bearish USD Trade: Consumer Confidence Survey Disappoints
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Need green, five-minute candle to favor a long EUR/USD trade
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Implement same setup as the bullish dollar trade, just in the opposite direction