Summary:
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Uni Mich consumer sentiment falls to 11-month low
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95.3 well below 98.1 exp; warnings of increasing sensitivity to inflation
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USDIDX close to printing possible reversal signal
The final economic release of note for the week has seen a further weak print from the US after yesterday’s Philly Fed disappointment. The University of Michigan consumer sentiment index for the current month fell to its lowest level in 11-months with a reading of 95.3 coming in well below the 98.1 expected. Even though the prior reading was revised higher to 97.9 from 97.1 it doesn’t mask the fact that this is another weak data point which raises further questions surrounding the rally in the US dollar. As well as the main index falling the current conditions reading also experienced a fair size negative shock, dropping to 107.8 from 114.4.
The UoM current conditions has fallen fairly sharply to 107.8 and is now at levels not seen since 2016. Source: Bloomberg
While both these points are concerning, perhaps the most worrying aspect comes from comments made by the chief economist, Richard Curtin. Curtin struck a pretty negative tone in his assessment of the results, with remarks that consumers seem to be growing increasingly sensitive to inflation compared to in the past the standout. Selected comments from Curtin are as follows (emphasis is ours):
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The decline was concentrated among households in the bottom third of the income distribution
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Buying conditions for large household durables sank to the lowest level in nearly four years
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Vehicle prices were judged less favourable than anytime since the close of 1984
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The data suggests that consumers have become much more sensitive to even relatively low inflation rates than in past decades
The US dollar has enjoyed a strong week, rallying up to its highest level since June 2017, but a look at the weekly chart could reveal something telling. While these is still a few hours to go until the markets close for the weekend, a gravestone Doji may be forming on W1. This could be seen as a possible reversal signal and as long as the highs of 96.87 aren’t broken then a pullback can occur. Fib retracements of the rally seen from the 2018 lows around 88.20 could offer possible targets for shorts with the 23.6% at 94.82 the first of interest.
The USDIDX may be close to forming a classic reversal signal on W1 after an impressive run higher of late. Source: xStation
