The euro slumped to an 11-month low against the broadly stronger U.S. dollar on Friday, as investors digested comments made by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi.
EUR/USD hit a daily low of 1.3221 on Friday, a level not seen since September 9, 2013, before subsequently consolidating at 1.3240 by close of trade, down 0.3% for the day and 1.33% lower for the week.
The pair is likely to find support at 1.3161, the low from September 9 and resistance at 1.3287, the high from August 21.
Speaking at the Fed's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, Yellen said the U.S. economy is recovering and added the labor market is improving as well.
Meanwhile, European Central Bank President Mario Draghi told the Jackson Hole gathering that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.
The comments highlighted the view that the paths of euro zone and U.S. monetary policies are diverging.
Minutes of the Fed’s July meeting published Wednesday showed that some officials believe the strengthening recovery and ongoing improvement in the labor market supports a move towards tightening monetary policy.
Meanwhile, tensions over the crisis in Ukraine remained in focus after NATO said it was observing an alarming increase in Russian forces near the border with Ukraine.
Ukraine declared on Friday that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.
In the week ahead, investors will be looking ahead to key U.S. data for further indications on the strength of the economy and the possible future path of monetary policy.
The U.S. will produce data on second quarter gross domestic product, as well as reports on new home sales, durable goods orders and initial jobless claims.
Friday's preliminary reading of August euro zone inflation will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, August 25
In the euro zone, Germany is to publish the Ifo report on business climate for August.
The U.S. is to produce data on new home sales for the month of July.
Tuesday, August 26
The U.S. is to publish reports on July durable goods orders, as well as house price inflation and consumer confidence.
Wednesday, August 27
Germany is to publish the Gfk report on consumer climate for September.
Thursday, August 28
In the euro zone, Germany is to release preliminary data on consumer price inflation as well as a report on unemployment for August.
Later Thursday, the U.S. is to release revised data on second quarter GDP, as well as the weekly government report on initial jobless claims and data on pending home sales for July.
Friday, August 29
The euro zone is to release preliminary data on consumer inflation and unemployment, while Germany is to publish data on retail sales.
The U.S. is to round up the week with a report on personal income and expenditure and revised data from the University of Michigan on consumer sentiment.