Michigan Consumer Sentiment data as expected. The table is set for the FOMC!

Yesterday we pondered what could happen if the Michigan Consumer Sentiment Index inflation expectations components came out higher than expected. Would the Fed again leak a headline to the Wall Street Journal that it will raise rates more than expected, as it had done during June? Well, the question seems to be mute right now as the data was roughly as expected. The headline Michigan Consumer Sentiment Preliminary reading for September was 59.5 vs 60 expected and a reading of 58.2 in August. More importantly, the 1-year Inflation Expectations reading was 4.6% vs 4.7% expected and 4.8% in July. This was the lowest level since September 2021. The 5-year Inflation Expectations reading fell to 2.8% vs 2.9% expected and 2.9% prior. This was the lowest reading since July 2021. As a result of this data, the FOMC is likely to raise rates by 75bps next week, as expected.

What is inflation?

EUR/USD immediately went bid after there release of the print, as fears of a 100bps rate hike next month were diminished. The pair quickly moved towards parity.

Source: Tradingview, Stone X

On a daily timeframe, EUR/USD has been trading in a downward sloping channel since making yearly highs on February 10^th at 1.1498. After breaking 1.0000 and testing support at the bottom downward sloping trendline of the channel, EUR/USD bounced to test strong horizontal resistance at the top trendline of the channel near 1.0340. Since then, the pair has moved lower and made a 20 year low at 0.9864 before bouncing to the 61.8% Fibonacci retracement level from the high of August 10^th to the lows of September 6^th, near 1.0176 (this was also the top trendline of the channel once again). Price then pulled back to parity on September 13^th and has been oscillating around it since.

Source: Tradingview, Stone X

Trade EUR/USD now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, first resistance is at the lows of September 12^th at 1.0104. Above there, resistance is at the top trendline of the long-term term channel near 1.0140, then the highs from September 12^th at 1.1098. However, if EUR/USD can’t hold its bid and moves lower, the first support is at today’s low of 0.9945, then the lows from September 6^th at 0.9869. Below there, the next support level is at the 127.2% Fibonacci extension from the lows of September 6^th to the highs of September 12^th, near 0.9775.

Source: Tradingview, Stone X

The FOMC meets on Wednesday this week and is likely to lift the Fed Funds rate by 75bps from 2.5% to 3.25%. Prior to today’s Michigan Consumer Sentiment data, markets expected there to be a higher chance that the Fed would hike 100bps. However, after seeing today’s inflation components of the data, that chance has fallen to only 16%.

Learn more about forex trading opportunities.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.