EUR/USD Forecast: Dollar eases as Powell pledges to tame inflation

EUR/USD Current Price: 1.1335
US Fed Powell said they would stop higher inflation from getting entrenched.
ECB’s Lagarde repeated the central bank’s commitment to price stability.
EUR/USD holds within familiar levels, with a slightly bullish bias in the near term.

The EUR/USD is marginally higher on Tuesday, trading in the 1.1330 area as demand for the American currency receded, with stocks up and government bond yields down. The catalyst has been US Federal Reserve chief Jerome Powell, ahead of the hearings for his nomination as Fed’s head for another term. Among other things, Powell noted that the economy is growing at its fastest rate in years, while the labour market is “robust.” Also, he said the Fed would stop higher inflation from getting entrenched, cooling down the market’s concerns.

Meanwhile, Vice-Chair Richard Clarida stepped down on Monday, after failing to report stocks’ trading just a few days before the Fed announced emergency financial measures to shore up markets in the middle of the coronavirus pandemic. Fed vice-chair said his failure to report those trades was the result of “inadvertent errors.”
Across the pond, the European Central Bank President Christine Lagarde said they understand that rising prices are a concern for many people and noted that they take this concern very seriously. “People can trust that our commitment to price stability is unwavering, which is critical for the firm anchoring of inflation expectations and for confidence in the currency,” Lagarde said.

On the data front, the calendar has little to offer. The US will publish January IBD/TIPP Economic Optimism, previously at 48.4. Fed’s Powell hearing will start right after Wall Street’s opening.

EUR/USD short-term technical outlook
From a technical point of view, EUR/USD has made no progress. The pair keeps hovering around the 1.1300 figure and between the range set late in November. The pair is technically neutral, according to the daily chart, pivoting around a flat 20 SMA, as the longer moving averages head lower above the current level. Technical indicators, in the meantime, remain around their midlines, lacking clear directional strength.

In the near term, the risk skews to the upside. The 4-hour chart shows that the pair is developing above all of its moving averages, which anyway remain inside quite a limited range. At the same time, technical indicators remain stable within positive levels, although without reflecting directional interest.

Support levels: 1.1305 1.1260 1.1220

Resistance levels: 1.1345 1.1385 1.1410