EUR/USD fades ECB-led knee-jerk spike beyond 1.0800 handle

The EUR/USD pair faded ECB-decision knee-jerk bullish spike to fresh 3-week high level of 1.0838 and has now erased all of its daily gains, inching closer towards drifting into negative territory. 

Currently trading around mid-1.0700s, the pair initially surged through 1.0800 handle after ECB decided to leave its key benchmark interest rates unchanged and the current €80bn QE program will be extended till only April 2017. The pair, however, quickly changed course after details emerged that the bond purchase program has been extended until the end of Dec 2017 but has been reduced €60 billion.

Focus would now turn to ECB's update growth and inflation forecasts, including a first look at 2019. Also in focus would be ECB President Mario Draghi's speech, which would add to the prevalent volatility around the shared currency.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "A critical one, however, is the 1.0840/60 region, where the pair bottomed for most of 2015 and current 2016, as moves below the level have proved short-lived. Should the price regain such level, the risk of an upward extension towards 1.0900/50."

"The immediate support on the other hand, is the 1.0740 level, with a break below it exposing 1.0690, the 23.6% retracement of the same decline. Below it, the pair will likely resume its bearish trend, furthermore, as market's attention will flip towards the FED's meeting next week with 1.0640 and 1.0570 as the next supports to consider."