Chart of the Day EURUSD

EURUSD - EUR: Eurozone inflation accelerated in November but remained benign: The final reading of Eurozone HICP inflation was unchanged at 1.0%YOY in November (Oct: +0.7%), reflecting the higher cost of food, alcohol and tobacco (+2.0% vs +1.5%) and mainly higher services inflation (+1.9% vs +1.5%). Core CPI rose 1.3% YOY (Oct: +1.1%), its largest gain in seven months. The acceleration in price pressure is welcoming news for the ECB, which is battling low inflation and slower growth cutting deposit rate and by reintroducing asset purchase program (APP) in November. Nonetheless, the headline HICP rate is still far below the central bank’s target of just below 2%. Underlying inflation has in fact remained weak, spurred mainly by services inflation that was driven by lower contributions from the cheaper package holiday prices in November. 

USD: The impeachment debate overnight before the official vote this morning is likely to have limited impact on the market as the vote was mostly adopted on partisan lines. The result is unlikely to change how the Fed assesses the economy as well as the progress of US-China trade talk. Two more Fed officials joined their colleagues sharing the optimistic outlook on the US economy yesterday. Chicago Fed official Evans said the economy is doing remarkably well. Meanwhile, New York Fed President John Williams also expects the US economy to grow by about 2% in 2020 while the unemployment rate will stay close to its current 3.5% level.

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From a technical and trading perspective, EURUSD has potentially carved out a double top around 1.12  this pattern is further supported by momentum and sentiment divergence, Fridays key reversal pattern and volume spike, looks set to be further confirmed today with a second  close below the near term Volume Weighted Average Price, with the daily chart bearish as of last night's New York close, a failure at 1.11 will likely encourage further downside to test near term support at the 1.1050 area, a breach here would suggest extended downside looking for a test of bids towards 1.1000

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