EUR/USD Plummets ahead of ECB Press Conference

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The euro declined sharply against its US counterpart on Wednesday, as investors turned their attention to the European Central Bank’s monthly monetary policy meetings, which will outline the details of the recently announced quantitative easing program.

The EUR/USD declined more than 100 pips to 1.1069, a fresh 11-year low. The pair’s next support level is located at 1.1017. A break below 1.10 would eventually lead to 1.0963 and 1.0809. On the upside, resistance is ascending from 1.1171.

The EURUSD is forecast to fall to 1.08 over the next 12 months, as the ECB expands its quantitative easing program while the US Federal Reserve begins normalizing monetary policy. On Thursday the ECB will outline how it expects to achieve its 60 billion a month stimulus program, which will run until at least September 2016.

In economic data, Eurozone retail sales surged in January, offering cautious optimism the currency region’s nascent recovery was gradually taking shape. Retail revenues rose for a fourth consecutive month and at the fastest pace in more than nine years, according to Eurostat.

Receipts rose by 1.1 percent from December. Sales were up 3.7 percent compared to January 2014.

Earlier this week Eurostat said Eurozone consumer prices declined for a third consecutive month in February, although the rate of decline was only half that of January.

Separately, a market research firm reported stronger business conditions throughout the euro area in February.  Markit’s PMI composite – a gauge of business activity in the manufacturing and services sectors – rose to 54.4 in February from 52.6 in January, suggesting the euro area economy was expanding at a steady rate in the first quarter.

Germany’s composite index rose to 53.8 in February from 53.5 in January. France’s composite PMI rose to 53.4 from 49.3, a sign the French economy was back in expansion mode.

Separately, the ADP Institute said US private sector employment increased by 212,000 in February, following an upwardly revised gain of 250,000 the previous month. While weaker than expected, the February figure suggested the US labour market was heading toward full employment.