EUR/USD drops below 1.14 for the first time in 13 months

• CPI figures from the U.S. boost the greenback.
• US Dollar Index remains on track to make its highest weekly close of the year.
• The EUR/USD loses more than 100 pips on the week.

The EUR/USD pair extended its losses in the NA session and touched its lowest level since early July of 2017 at 1.1393. With the trading volume thinning out toward the end of the week, the pair recovered a small part of its daily losses and was last seen trading at 1.1402, where it was down 1.1% on the day.

Earlier today, the U.S.  Bureau of Labor Statistics reported that the inflation, measured by the CPI, rose 0.2% and 2.9% in July on a monthly and yearly basis, respectively. Moreover, the core-version of the CPI, which excludes volatile food and energy prices, came in at its highest level since September 2018 at 2.4% to surpass the analysts' estimate of 2.3%.

"Core inflation is likely to strengthen further, as wages are grinding higher (putting upwards pressure on costs)," ING analysts wrote. "Combined with strong momentum in the US economy -- Q2 growth reached 4.2% -- the Fed looks like it will stick to its current plan to deliver two more interest rate hikes this year." 

Following the data releases, the US Dollar Index extended its gains to a fresh 13-month high at 96.38 and went into a consolidation phase before markets wrap up the week. At the moment, the index is up 0.8% on the day at 96.36. In addition to the upbeat inflation data, the greenback gathered strength as a safer currency amid the meltdown witnessed in the TRY and other EM currencies.

Technical outlook

The pair could face the next support at 1.1315 (Jul. 5, 2017, low) ahead of 1.1200 (psychological level) and 1.1120 (Jun. 20, 2017, low). On the upside, resistances align at 1.1535 (daily high), 1.1630 (20-DMA) and 1.1770 (100-DMA). The RSI indicator on the daily chart dropped below the 30 mark on Friday to suggest that the pair is technically oversold and it could have a difficult time pushing lower before making a upward correction.