Trading the News: U.S. Consumer Confidence
What’s Expected:
Time of release: 03/26/2012 14:00 GMT, 10:00 EDT
Primary Pair Impact: EURUSD
Expected: 67.5
Previous: 69.6
DailyFX Forecast: 66.0 to 70.5
Why Is This Event Important:
The Conference Board’s Consumer Confidence survey is expected to fall back to 67.5 in March from a three-month high and the drop in household sentiment may drag on the U.S. dollar as it dampens the outlook for growth. As the FOMC retains a cautious outlook for the world’s largest economy, a dismal print may renew expectations for additional monetary support, but the resilience in private sector consumption may limit the central bank’s scope to expand the balance sheet further as the economy gets on a more sustainable path.
Recent Economic Developments
The Upside
| Release | Expected | Actual |
| Advance Retail Sales (FEB) | 0.5% | 1.15 |
| Change in Non-Farm Payrolls (FEB) | 165K | 236K |
| Consumer Credit (JAN) | $14.700B | $16.151B |
The Downside
| Release | Expected | Actual |
| Consumer Price Index (YoY) (FEB) | 1.9% | 2.0% |
| Average Hourly Earnings (YoY) (FEB) | 2.1% | 2.1% |
| Personal Income (JAN) | -2.4% | -3.6% |
The expansion in consumer credit along with the pickup in job growth may prop up household sentiment, and we may see a growing number of Fed officials adopt a more neutral to hawkish tone for monetary policy as the economic recovery gradually gathers pace. However, the persistent weaken in wage growth paired with sticky inflation may put a dent on household sentiment, and the FOMC may retain its highly accommodative policy stance throughout 2013 in an effort to address the ongoing slack in the real economy.
Potential Price Targets For The Release
As the EURUSD struggles to hold above the 200-Day SMA (1.2874), the pair could be poised to give back the rebound from back in November (1.2659), and the euro-dollar may steady work its way back towards 1.2640-50 – the 23.6% Fibonacci retracement from the 2009 high to the 2010 low – as it searches for support. At the same time, the EURUSD may be limited to the upside as long as the relative strength index remains capped by the 46 figure, and we may see the longer-term bearish flag pattern continue to play out amid the deviation in the policy outlook.
Expectations for a drop in sentiment casts a bearish outlook for the reserve currency, but a positive development may set the stage for a long U.S. dollar trade as it raises the prospects for future growth. Therefore, if the survey exceeds market expectations, we will need to see a red, five-minute candle following the release to generate a sell entry on two-lots of EURUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in an effort to lock-in our gains.