Investing.com -- EUR/USD fell to its lowest level in nearly a month on Friday, as foreign exchange traders digested dovish indications from Mario Draghi of further interest rate cuts by the European Central Bank in the coming months.
The currency pair traded between 1.1218 and 1.1309, before settling at 1.1227, down 0.0063 or 0.56% on the session. The euro fell against the dollar for the third straight trading day, closing below 1.13 for the fifth time in the last seven sessions. With the sharp losses, the euro fell to the lowest level versus the dollar since March 29. The dollar closed higher against the euro for the second straight week.
Despite the recent downturn, the euro is still up against its American counterpart by more than 3.3% since the start of the year.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
Investors continued to react to dovish comments from European Central Bank president Mario Draghi on Thursday regarding the likelihood of future easing measures from the central bank. It came after the ECB's Governing Council left its benchmark interest rate for the euro zone at a record-low of zero and its deposit rate unchanged at Minus-0.4%. More critically, Draghi noted that the ECB could continue to hold interest rates at comparative low levels beyond the expiration of a comprehensive EUR 80 billion a month Quantitative Easing program in March, 2017.
The decision came days before the start of the Federal Open Market Committee's (FOMC) two-day meeting on April 26-27. At the meeting, the Federal Reserve is widely expected to leave its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50%. The Fed has left short-term interest rates unchanged in each of its first two meetings this year.
This week, the majority of respondents in a poll taken by Reuters expect the Fed to hold rates firm at the meeting before approving a rate hike in June. Of 80 economists polled in the survey, more than two-thirds agreed that the FOMC will lift the Fed Funds Rate by 25 basis points in June to 0.50-0.75%. Another 20% believe the FOMC will implement its first rate hike of the year in September.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as investors pile into the greenback in an effort to capitalize on higher yields.
Elsewhere, U.S. president Barack Obama sent stark warnings to British voters on the potential trade ramifications that could ensue if they support a departure from the European Union at a highly-anticipated referendum on June 23. While addressing reporters in London at a joint news conference with UK prime minister David Cameron, Obama emphasized that the outcome of the "Brexit referendum" is a matter of "deep interest" to the U.S.
"The United States wants a strong United Kingdom as a partner and the United Kingdom is at its best when it is helping to lead a strong Europe," Obama said.
"Some of the folks on the other side have been ascribing to the United States certain actions we will take if the U.K. does leave the EU. Maybe at some point down the line there might be a UK-US trade agreement but it won’t happen any time soon," Obama added.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.5% to an intraday high of 95.15, its highest level in a week. The index, which closed at 95.11, is still down more than 1.5% over the last two months.