Investing.com -- EUR/USD tumbled by nearly 1% on Thursday building on losses from one session earlier, as the European Central Bank sent strong signals it could extend its bond-buying program beyond 2016 in an effort to stave off potential deflation.
The currency pair traded between a range of 1.1087 and 1.1243 before settling at 1.1127, down 0.0100 or 0.89% on the session. The euro fell to its lowest closing level against the dollar in more than two weeks. After surging more than 2% on August 24 to rise above 1.17, the euro has now closed lower against its American counterpart in six of the last nine sessions.
EUR/USD likely gained support at 1.1017, the low from Aug. 19 and was met with resistance at 1.1562, the high from Aug. 26.
The euro fell sharply against the dollar in European afternoon trading, after the ECB held interest rates at 0.05%, while downgrading its GDP and inflation forecasts over the next two years. The ECB also kept its marginal lending rate at 0.30% and left its facility rate unchanged at 0.20%.
Citing higher downside risks due to lower energy and commodity prices, ECB head Mario Draghi lowered the central bank's inflation projections for the remainder of 2015 to 0.1% from a previous estimate of 0.3%. The ECB has also lowered inflation projections for 2016 and 2017 from 1.5% and 1.8% to 1.1 and 1.7% respectively, Draghi added. At the same time, the ECB reduced GDP projections over the period predicting that it will remain below 2% through the end of 2017.
Draghi noted that the new forecasts were drawn up on Aug. 12, before China rattled global markets early last week with a wave of pessimistic economic indicators. The comments provided compelling indications that the ECB could ramp up its €60 billion a month Quantitative Easing program, which it launched earlier this spring. Previously, the ECB intended to continue the bond-buying program through September, 2016. On Thursday, Draghi indicated that the ECB could add stimulus measures and extend the duration of the program as a mechanism for bolstering inflation.
Elsewhere, the U.S. Department of Labor said that the number of individuals filing for initial job benefits increased by 12,000 last week to 282,000. Analysts expected initial jobless claims to rise by 5,000 to 275,000. Investors await the release of Friday's U.S. jobs report by the Bureau of Labor Statistics for further indications on the strength of the labor market. In July, U.S. private payrolls increased by 215,000 as the unemployment rate remained steady at 5.3%. A soft reading on Friday could convince the Federal Reserve to delay a potential interest rate hike beyond September.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, soared more than 0.65% to an intraday high of 96.64, before closing at 96.37. For the week, the index is relatively flat, up by less than 0.5%.
Yields on U.S. 10-Year Treasuries fell two basis points on Thursday to 2.163% ahead of Friday's employment report.