The euro pulled back from session highs against the dollar on Thursday after European Central Bank President Mario Draghi reiterated warnings that the strong euro could trigger additional monetary easing.
EUR/USD was trading at 1.3824, down from session highs of 1.3842 ahead of the remarks.
The pair was likely to find support at 1.3785, the low of April 22 and resistance at 1.3853.
Speaking at a conference in Amsterdam, Draghi said the euro exchange rate is an 'increasingly important factor' in monetary policy.
The exchange rate is not a policy target in itself, the ECB chief said, but the bank’s monetary policy stance could be affected by a continued appreciation in the currency.
'A rise in the exchange rate, all else being equal, implies a tightening of monetary conditions, a downward impact on inflation and potentially a threat to the ongoing recovery. If so, this would call for policy action to maintain the current accommodative stance,' Draghi said.
He also said the ECB could launch a 'broad-based' asset purchase program if the medium-term inflation outlook worsened.
Elsewhere in the euro zone, Spain saw borrowing costs decline to the lowest level on record at an auction of ten-year government bonds on Thursday, pointing to underlying confidence in the euro zone recovery.
Earlier Thursday, German research institute Ifo reported that its business climate index rose to a two-month high of 111.2 this month from 110.7 in March, ahead of expectations for 110.5.
Against the yen the euro was slightly lower, with EUR/JPY slipping 0.12% to 141.49, down from 141.78 ahead of Draghi’s remarks.