Investing.com -- EUR/USD fell slightly on a light day of post-Thanksgiving trading, as currency traders look ahead to next week's European Central Bank meeting for further signals of potential divergence in monetary policies in the U.S. and the euro zone.
The currency pair wavered between 1.0596 and 1.0638 before settling at 1.0596, down 0.0015 or 0.15% on the session. The euro remained near seven-month lows against the dollar after closing under 1.07 for the sixth straight session. The dollar ends the week with a three-day winning streak against the euro and has closed higher in five of the last six sessions.
EUR/USD likely gained support at 1.0591, the low from November 23 and was met with resistance at 1.1096, the low from Oct. 28.
The euro could fall even further later next week if the ECB's Governing Council institutes further easing measures to stimulate the economy and bolster inflation at its meeting in Frankfurt. Over the last few weeks, ECB president Mario Draghi has sent strong indications that the central bank could increase the scope of its comprehensive EUR 60 billion a month quantitative easing program at the meeting. On Wednesday, Reuters reported that the ECB could also impose a two-tiered penalty next week for banks that leave deposits at its facility. The ECB's benchmark refinancing rate is at a record low of 0.05%, while rates at the deposit facility are already in negative territory at minus-0.20%.
Less than two weeks later, the Federal Open Market Committee is expected to raise its benchmark Federal Funds Rate for the first time in more than nine years. The rate, which banks charge on interbank overnight loans at the Fed, has remained at a near-zero level since December, 2008. The potential for sharp divergence between monetary policies in the U.S. and the euro zone has sent the dollar soaring, as foreign investors look to pile into the greenback in order to capitalize on higher yields.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.3% to an intraday high of 100.26. The index is now points away from its 12-months high at 100.38 in mid-March. For a stretch of five sessions in mid-March the index remained near 100, before falling back when the Fed opted to leave short-term rates unchanged. Over the last year of trading, the index has spiked nearly 14%.
Yields on the U.S. 10-Year fell one basis point to 2.22%, while yields in the Germany 10-Year lost one basis point to 0.46%. On Thursday, yields on 5-Year German bunds approached negative 0.2%, falling to all-time record lows.