EUR/USD looks ready to further extend its gains

EUR/USD has been holding onto high ground after the Fed pledged to support the economy. Yohay Elam, an Analyst at FXStreet, expects the pair to power higher as weak US inflation and a reminder of the labor market's struggles are set to weigh on the dollar.

See: EUR/USD to head towards the 1.2300 mark – Westpac

Key quotes

“Contrary to expectations of some market participants, America's stimulus plans have yet to produce inflation as January's Consumer Price Index figures have demonstrated – only 1.4% yearly in both headline and core gauges. That is well below the Federal Reserve's 2% target.” 

“Federal Reserve Chair Jerome Powell stressed that any future inflation will likely ‘not mean that much’ and moved to talk about the labor market. Powell said that the US should strive to reach full employment, which is one of the Fed's mandates. More importantly, he added that the bank will not automatically tighten policy solely on improvement in the job market. It does not get more dovish than that.” 

“The Relative Strength Index on the 4-hour chart has dropped below 70 – exiting overbought conditions and allowing for more rises.”

“Some resistance is at the daily high of 1.2130, followed by 1.2150, where the 200 SMA hits the price. Further above, the upside target is 1.2190, which was a stubborn cap in January. 

“Some support awaits at the daily low of 1.2115, followed by 1.2050, a clear separator of ranges. The next cushions are 1.20 and 1.1960.”