The European Central Bank (ECB) is scheduled to announce its latest monetary policy decision and would grab the centre stage on Thursday. Although, the central bank is expected to hold its monetary policy steady, it might still infuse substantial volatility in the FX market, especially for the EUR pairs.
In wake of recent rumors that ECB might consider winding down its €80bn monthly bond purchase, focus would be on comments from ECB President Mario Draghi over questions about tapering as he addresses a press conference following the policy decision announcement. Investors will also scrutinize Draghi's speech for clues on the central bank’s future plans and a potential extension of the QE program beyond March 2017.
Most economists expect the central bank to announce an extension by year-end and might also tweak the technical parameters of the QE program. A strong signal towards new easing measures, if required, would be enough to attract fresh selling pressure around the single currency.
Technical outlook
From technical perspective, the pair is trading closer to an important horizontal support near 1.0960-50 area. Hence, a sustained break below this important support, leading to a subsequent drop below 1.0935 support marking 61.8% Fibonacci retracement level of 1.0522-1.1616 up-move, would turn the pair vulnerable to break below 1.0900 round figure mark and head towards March lows support near 1.0830-25 horizontal zone before eventually dropping to 1.0715-10 area (yearly lows touched in January).
Alternatively, rebound from current support area might now confront immediate resistance near 1.1060-65 region, representing 50% Fibonacci retracement level. A sustained move above this immediate hurdle seems to trigger a short-covering bounce towards an important horizontal support break-point, now turned strong resistance near 1.1120-30 region above which the pair is likely to aim towards an important confluence resistance near 1.1185-90 region, comprising of a short-term descending trend-line and 38.2% Fibonacci retracement level
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