Investing.com -- EUR/USD retreated from three-week highs reached in the previous session, as currency traders responded to the aftershocks of the European Central Bank's decision to implement widespread easing measures at a critical meeting in the previous session.
The currency pair traded in a broad range between 1.1080 and 1.1210, before settling at 1.1148, down 0.26% on the session. On Thursday, the euro surged more than 1.6% against the dollar, following hawkish comments from ECB president Mario Draghi, enjoying one of their strongest one-day moves in three months. EUR/USD has closed over 1.11 in each of the last two sessions. Before Thursday's surge, the pair last eclipsed the threshold on February 22.
EUR/USD likely gained support at 1.0709, the low from January 5 and was met with resistance at 1.1378, the high from Feb. 11.
The sharp sell-off came one day after the ECB's Governing Council approved a comprehensive stimulus package at Thursday's meeting in a last-ditched attempt to stave off threats of deflation and bolster investor sentiment. The ECB lowered its marginal lending rate by 0.05 to 0.25% and cut its main refinance rate by 0.05% to a new record-low of zero. The Governing Council also pushed its deposit rate deeper into negative territory, by cutting it 0.1 to Minus-0.4%.
At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to 80 billion a month and extended the program by several months through March, 2017. The ECB launched the comprehensive Quantitative Easing program last March in order to increase the amount of money supply available for banks to lend money to businesses and individuals. In addition, the ECB introduced a new series of Long Term Refinancing Operations (LTROs) on Thursday and announced that it will be purchasing non-financial corporate debt issued by companies established in the euro zone.
Also on Friday, data released by the U.S. Commodity Futures Trading Commission showed that net long positions in the U.S. dollar declined from $7.45 billion to $6.88 billion last week. It marked the fourth consecutive week that net longs in the greenback dipped under $10 billion.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose mildly by 0.18% to 96.23. Since nearing 12-month highs in early-February, the dollar has slumped more than 3.4%.
Investors turn their attention to an interest rate decision by the Federal Reserve next Wednesday, following the completion of the Federal Open Market Committee's (FOMC) two-day March meeting. While the FOMC is widely expected to leave its benchmark Federal Funds Rates unchanged, the U.S. central bank could provide guidance on its pace of tightening over the next several months. In December, the FOMC abandoned a seven-year zero interest rate policy by raising the Fed Funds Rate 25 basis points to a target range between 0.25 and 0.50%.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.
Yields on the U.S. 10-Year rose by five basis points to 1.98%. Since falling below 1.75% in early-February, yields on U.S. 10-year Treasuries have increased have moved higher in four consecutive weeks, representing their longest winning streak since May, 2013.