Investing.com -- EUR/USD fell to a two-month low on Friday extending losses from a massive sell-off from the previous session, as currency traders continued to digest dovish comments from European Central Bank president Mario Draghi on the likelihood of further stimulus measures to boost economic growth in the euro zone.
The currency pair traded in a broad range between 1.0997 and 1.1140 before settling at 1.1012, down 0.0093 or 0.84% on the session. On Thursday, the euro tumbled more than 2% against the dollar, suffering its worst one day fall since January, after Draghi sent strong hints that the ECB will resume cutting interest rates, even as they remain in negative territory.
At one point in Friday's session, EUR/USD slipped below 1.10 for the first time since August 11. For the week, the euro fell against the dollar by approximately 3%. The euro has closed down against its American counterpart in four of the last five sessions and six of the last eight.
EUR/USD likely gained support at 1.0847, the low from Aug. 5 and was met with resistance at 1.1496, the high from Oct. 15.
Upon the completion of the ECB Governing Council's two-day meeting in Malta, Draghi hinted that the ECB is ready to slash interest rates from their current record-low of 0.5% and extend the scope of its comprehensive EUR 1.1 trillion asset-purchasing program. Citing weak growth among emerging market nations, Draghi also noted that the ECB could ramp bond purchases from its current level of EUR 60 billion a month.
"The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation," Draghi said. "In particular, the Governing Council recalls that the asset purchase program provides sufficient flexibility in terms of adjusting its size, composition and duration."
Large-scale bond buying programs are intended to push interest rates down, as the price of government bonds move higher. Quantitative easing programs are also intended to depress currency values, as it becomes more appealing for domestic investors to invest in the region due to the lower rates.
Although the ECB initially planned on running the asset-purchasing program through September, 2016, Draghi reiterated on Thursday it could last longer if long-term inflation throughout the euro zone struggles to approach its targeted goal of 2%.
Currency traders now turn their attention to next week's Federal Open Market Committee's October monetary policy for further clues on whether the U.S. central bank could raise short-term interest rates at some point in 2015. A rate hike is viewed as bullish for the dollar, as foreign investors pile into the greenback 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, gained more than 0.7% to close at 97.18. In U.S. afternoon trading, the index surged to its highest level since mid-August.