The US preliminary University of Michigan Consumer Sentiment Index and Inflation Expectations data for February will be released at 15:00 GMT. The Consumer Sentiment Index is expected to fall from 56.4 in January to 55.0, indicating lower consumer confidence. This could lead to reduced household spending, potentially influencing the Federal Reserve’s monetary policy decisions.
The UoM’s Consumer Inflation Expectations from January remain at 4% for the one-year forward outlook. Market participants will be keen to see how this data affects the EUR/USD exchange rate, which is currently trading around 1.1789. The 20-day Exponential Moving Average is at 1.1792, closely followed by traders assessing the currency pair’s movements.
Technical Indicators and Key Levels
Technical indicators, such as the 14-day Relative Strength Index at 51, suggest steady momentum. Key support and resistance levels are seen at the 61.8% Fibonacci retracement of 1.1770 and the 50% retracement at 1.1826. If the price moves back above 1.1826, further recovery might occur. However, failing to hold 1.1768 could lead to a deeper correction toward 1.1684.
The Michigan Consumer Sentiment Index is a valuable indicator of US consumer spending behaviour and economic health. A higher reading tends to be positive for the USD, while a lower reading suggests a bearish outlook.
The preliminary University of Michigan data has just been released, and the Consumer Sentiment Index came in weaker than expected at 54.5, below the 55 consensus and January’s 56.4 reading. This signals growing consumer pessimism, which typically leads to reduced spending and strengthens the case for future Federal Reserve interest rate cuts. Consequently, we are seeing initial US Dollar weakness, pushing EUR/USD towards the key 1.1800 level.
This report adds to the narrative that the US economy is cooling, which we also saw in the final quarter of 2025 when GDP growth slowed to an annualized 1.9%. With consumer sentiment now at its lowest point in over a year, the Fed’s hawkish stance is being seriously questioned. For derivative traders, this increases the probability of a dovish pivot from the central bank in the coming months.
Trading Strategies and Historical Context
Given the potential for an upward break in EUR/USD, we should consider buying near-term call options with strike prices above the 1.1826 Fibonacci level. If the pair breaks this resistance, these options could profit from an accelerated move towards the 1.1900 handle. The increased uncertainty also makes long volatility strategies, such as buying a straddle, attractive to capture a significant move in either direction.
We must also look at the historical context from 2023, when falling consumer sentiment did not immediately weaken the dollar because inflation remained the Fed’s primary concern. However, with the latest Consumer Price Index from January 2026 showing core inflation moderating to 3.2%, the situation today is different. This gives the central bank more leeway to focus on the weakening growth outlook.
The one-year inflation expectations component also fell to 3.8% from 4.0% in January, reinforcing the disinflationary trend. This is a crucial data point, as it eases pressure on the Fed to maintain high interest rates to anchor public expectations. This further supports a fundamentally bearish outlook for the US Dollar in the weeks ahead.
However, if the EUR/USD fails to break decisively above the 1.1826 resistance level, the pair could remain range-bound as suggested. In this scenario, selling premium through strategies like an iron condor with bounds at 1.1680 and 1.1900 could be a viable approach. This would allow us to profit from time decay as long as the market remains contained.
