Summary:

• The key measure of consumer confidence in the US improves defying expectations
• US dollar tries to recover from today’s losses
• USDJPY fight at the key level, a reversal is possible

Conference Board has just released the most closely watched index of consumer confidence in the US. The index climbed to 122.9 pts. in August from 121.1 pts. in  July despite expectations for a dip to 120.3 pts. This means that while hopes for economic stimulus in the US have faded consumers remained upbeat. Conference Board also confirmed (as indicated by a flash release of the University of Michigan index) that a summer dip in confidence was only temporary. 

US consumer confidence is at decade’s highs. This could support the US dollar. Source: Macrobond, XTB Research 

Consumer confidence plays a major role for the Fed. With unemployment rate at multiyear lows strong consumer spending could drive inflation higher in the future. Although consumer spending has been somewhat below expectations as of late, high confidence could reinforce hopes for acceleration in spending going forward.

Obviously an improvement here is not enough to sway markets all the way back to the US currency. This week alone we will have more relevant reports: the ADP private employment report tomorrow and the NFP report on Friday. However, this is a good start for a beleaguered dollar.   

A solid data from the US could make a reversal from the key support on USDJPY possible. Today’s close of the D1 candle could be decisive. Source: xStation5 

It is worth to take a look at USDJPY where a hammer candle could form (on a D1 interval) just at the key support zone. If this holds true, a reversal higher could be possible.