EUR/USD bid above 1.22 as dollar sell-off continues

• EUR/USD trades near 1.2210 versus 1.2190 in Asia. 
• Powell’s dovish comments on inflation continue to weigh over the greenback. 

EUR/USD looks set to extend Wednesday’s gains as the US dollar remains on the offer, courtesy of the Federal Reserve President Jerome Powell’s dovish tone on inflation. 

The pair is currently trading at 1.2210, representing a 0.11% gain on the day, having printed a bullish close on Wednesday. 

Powell said Wednesday that there are significant disinflationary pressures worldwide, and inflation will take time to rise above the 2% target. Not only does the Fed foresee a slow rise in inflation, but it has also committed to keeping interest rates low for sometime after inflation crosses above 2%. In other words, rate hikes are unlikely to happen anytime soon, even though markets are betting on a swift global recovery on potential coronavirus vaccines. 

Hence, the dollar sagged on Powell’s comments and is extending losses on Thursday. Supporting the case for a continued rally in EUR/USD is the “unambiguously positive” Eurozone manufacturing and services activity data for December released Wednesday. The only risk for EUR/USD’s bullish outlook is a potential correction in the overstretched US stocks. 

Data-wise, the focus would be on the US weekly jobless claims and the Building Permits figure scheduled for release on Thursday. The final print of the Eurozone November Consumer Price Index will be released at 10:00 GMT. 

Technical levels