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Investing.com -- EUR/USD retreated from 5-month highs on Friday, slowing the momentum a Fed-inspired rally from earlier this week after the U.S. central bank slashed its interest rate forecast at a closely-watched meeting. The currency pair traded in a broad range between 1.1206 and 1.1343 before settling at 1.1269, down 0.0047 or 0.42% on the session. With the slight losses, the euro halted a three-day winning streak against the dollar when it surged more than 1%. More broadly, the euro has gained approximately 1.30% versus its American counterpart over the last month and nearly 4% since the start of the year. EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15. Foreign exchange traders could use a bit of a breather after a hectic stretch, which included interest rate decisions from four of the world's top central banks over the last 10 days. On Wednesday, the Federal Open Market Committee (FOMC) sent the dollar spiraling to five-month lows by lowering its interest rate forecast through 2018. Citing increased global financial and economic risks and a soft inflation outlook, the Fed held the target range on its benchmark Federal Funds Rate to 0.25-0.50% for the second consecutive meeting. More importantly, the U.S. central bank slashed its year-end projection for the Fed Funds Rate to 0.88%, signifying two rate hikes for the remainder of the year. After raising short-term interest rates in December for the first time in nearly a decade, the FOMC said in its median forecasts that it could hike rates as much as four times in 2016. Last week, the European Central Bank approved a host of stimulus measures including pushing rates deeper into negative territory and increasing the scope of its comprehensive Quantitative Easing program. In a speech before the International Research Forum on Monetary Policy in Frankfurt, St. Louis Fed president James Bullard theorized that low interest rates may be causing persistently low inflation. While noting that the U.S. labor market is nearing full-employment and inflation net of the oil price shock is approaching the Fed's 2% target, Bullard argued that the FOMC's current policy position remains extreme. At its current level, the Fed Funds Rate is about 3% below the FOMC's long-run target, Bullard said, while the Fed's balance sheet exceeds its pre-crisis level by more than $3.5 trillion. "Prudent policy suggests edging the policy rate and the balance sheet toward more normal levels," Bullard said. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.30% to an intraday high of 95.19, before falling back to 95.07 at the close. Since nearing 12-month highs at the start of the year, the index has slid almost 4%. Yields on the U.S. 10-Year fells two basis points to 1.87%, while yields on the Germany 10-Year lost one basis point to 0.21%.
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