The dollar came under selling pressure after the US confirmed annual inflation at 6.8% in November, its highest in almost four decades. EUR/USD battles to recover above the 1.1300 level as government bond yields ticked lower.
From a technical perspective, the overnight pullback from weekly lows and acceptance below the 1.1300 mark favours bearish traders. Some follow-through selling below the 1.1260-55 region will reaffirm the negative bias and accelerate the fall towards retesting weekly swing low, around the 1.1230-25 region. This is followed by the YTD low, or levels just below the 1.1200 mark touched on November 25. A convincing break below will set the stage for additional losses and drag the pair to the 1.1145 support area en-route the 1.1100 round-figure mark.
On the flip side, momentum back above the 1.1300 mark is likely to confront resistance near mid-1.1300s ahead of the 1.1380-85 area, marking the 38.2% Fibonacci level of the 1.1692-1.1186 downfall. A sustained strength beyond, leading to a subsequent move above the 1.1400 mark could push the pair further towards the 50% Fibo. level, around the 1.1440 region.
