EUR/USD Risks Fresh June Lows as U. of Michigan Confidence Rebounds

By DailyFx | Updated July 30, 2014 AAA

DailyFX.com -

- U. of Michigan Confidence Survey to Rebound in June

- Expected to Hold Above 80.0 for Seventh Consecutive Month

Trading the News: U. of Michigan Confidence

A rebound in the U. of Michigan Confidence survey may generate a further decline in the EUR/USD as it raises the fundamental outlook for the U.S. economy.

What’s Expected:

EUR/USD U. of Michigan Confidence

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Why Is This Event Important:

Indeed, a further improvement in household sentiment may spur a greater dissent within the Federal Open Market Committee (FOMC), and the Fed may show a greater willingness to normalize monetary policy sooner rather than later as the central bank hawks see a faster recovery in the second-half of 2014.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Consumer Credit (MAR)

$15.500B

$17.529B

Change in Non-Farm Payrolls (MAY)

215K

217K

Average Hourly Earnings (YoY) (MAY)

2.0%

2.1%

The ongoing pickup in employment paired with the uptick in wage growth may generate a marked rebound in consumer confidence, and a positive print may spur a bullish reaction in the USD as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Advance Retail Sales (MoM) (MAY)

0.6%

0.3%

Personal Consumption Expenditure Core (YoY) (APR)

1.4%

1.4%

Consumer Price Index (YoY) (APR)

2.0%

2.0%

However, we may see another unexpected downtick in the confidence survey as household face sticky prices, and a dismal U. of Michigan print may dampen the appeal of the greenback as it drags on interest rate expectations.

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How To Trade This Event Risk(Video)

Bullish USD Trade: U. of Michigan Survey Climbs to 83.0 or Higher

  • Need to see red, five-minute candle following the release to consider a short trade on EURUSD
  • If market reaction favors a long dollar trade, sell EURUSD with two separate position
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: Household Sentiment Continues to Deteriorate

  • Need green, five-minute candle to favor a long EURUSD trade
  • Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Bullish Outside Day (Harami) in Focus as EUR/USD Preserves Monthly Low (1.3501)
  • Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
  • Interim Support: 1.3490 (50.0% retracement to 1.3500 Pivot

Read More:

Price & Time: Kiwi!

EURAUD at Fresh 2014 Lows- Reversal Risk High Above 1.4420/40

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY P

2014

05/16/2014 13:55 GMT

84.5

81.8

-8

-18

May P 2014 U. of Michigan Confidence Survey

GBP/USD Chart

The U. of Michigan Confidence survey unexpectedly weakened in May, with the index slipping to 81.8 from 84.1 the month prior. Despite the weaker-than-expected print, the EUR/USD struggled to hold above the 1.3700 handle, with the pair closing the day at 1.3692.

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