EUR/JPY back below 121.00 handle after ECB

The EUR/JPY cross extended its pull-back from multi-week tops touched during early European session and slipped back below the 121.00 after ECB announcement.

Currently trading around 120.95 region, the cross ran through some offers after the European Central Bank left key benchmark interest rates unchanged. This means that the interest rate on the main refinancing operations, on the marginal lending facility and the deposit facility remains unchanged at 0.00%, 0.25% and -0.40%, respectively. The central bank also reiterated that the asset purchase program will continue at a monthly pace of €60 billion until the end of December 2017. 

Further downslide, however, remained limited as investors keenly await for the release of the central bank’s new projections for inflation and growth. Moreover, an offered tone around the Japanese Yen, despite of a weaker trading sentiment, has helped the cross to hold in positive territory for the second consecutive session. 

Investors will also remain focused on the subsequent press conference, where a more confident economic outlook by the ECB President Mario Draghi could spark another bout of short-covering rally around the Euro pairs.

Technical levels to watch

A subsequent retracement below 120.85 level, leading to a follow through pull-back below mid-120.00s, would turn the cross vulnerable to break below the key 120.00 psychological mark and head towards testing 100-day SMA support near 119.75 region.

On the flip side, momentum above mid-121.00s could get extended towards 122.00 mark, above which the cross seems to aim towards the 123.00 handle, with some intermediate resistance near 122.50-55 region.