Indicator Background
The CB Consumer Confidence Index provides critical readings on consumer confidence and spending. The index’s direction and rate of change are carefully scrutinized by analysts and traders looking for an indication of which direction the economy is headed .
The index has been on a sharp slide since February, when it peaked at 70.4 (a three-year high). October’s reading was a dismal 39.8, well below the market forecast of 46.1. The forecast for November stands at 43.9. Will the markets get it right this month?
Sentiments and levels
The Euro Zone debt crisis is taking its toll on the continent’s currencies, and the pound is no exception. The British economy remains in the doldrums, with manufacturing figures down and consumers pessimistic and wary about spending. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5850, 1.5780, 1.5690, 1.5633, 1.5530, 1.5480 and 1.5340.
5 Scenarios
- Within expectations: 40.0 to 48.0: In such a case, GBP/USD is likely to remain within range, with a small chance of breaking higher.
- Above expectations: 48.1 to 52.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 52.0: A sharp increase in consumer confidence could boost the dollar and send the pair below two or more support levels.
- Below expectations: 35.0 to 39.9: A reading lower than forecast could push GBP/USD above one resistance level.
- Well below expectations: Below 34.9: Due to the ongoing weakness of the US economy, a sharp decline remains a slight possibilty. In this outcome, the pair would likely break through two or more resistance levels.
By
M.Zohaib Gadit
Forex Trading Consultant
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