What MySQL Collation should I use for Magento?

Either utf8_unicode_ci or utf8_general_ci will work.

For explanations as to the differences between the two, consult

What's the difference between utf8_general_ci and utf8_unicode_ci

to find which will give you better results.

In Magento\Framework\DB\Ddl\Table you can find some hardcoded database options stored in the $_options variable:

protected $_options = ['type' => 'INNODB', 'charset' => 'utf8', 'collate' => 'utf8_general_ci'];

However, as Fiasco Labs' answer point out you can use utf8_unicode_ci as well.