EUR/JPY fades spike to 112.06, eyes ECB decision

EUR/JPY retreats from the session high of 112.06 to trade around 111.80 levels largely due to the drop in the USD/JPY pair. 

The cross staged a solid rebound from the upward sloping 50-DMA on Wednesday after having found support at the moving average on Tuesday.  

As of now, the pair sits above 121.64 (23.6% fib retracement of the rally from 113.72 to 124.09. 

The European Central Bank (ECB) is expected to keep the key policy tools unchanged later today. However, there is a risk that the markets addicted to Draghi’s dovish talk could be caught off guard by a slightly hawkish tone regarding rising inflation. 

EUR/JPY Technical Levels

A break below 121.64 (23.6% fib) could yield a re-test of 120.81 (50-DMA), under which the psychological level of 120.00 could be put to test. On the higher side, breach of 122.42 (Jan 13 high) would open doors for 122.94 (Jan 10 high) and 123.33 (Jan 3 high).