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EUR/USD continues to find support as stock futures climb

EUR/USD traded in a narrow range on Asian markets to end the week, after $1.08 proved to be the key support level when the euro came under pressure in overnight trade.

EUR/USD stays under pressure but finds support within April trading range

It was a relatively quiet session for the world’s largest currency pair in Asia on Friday. That followed a more volatile session in global markets, where traders tested the euro with a round of selling that saw EUR/USD fall from above $1.0880 to an intraday low of $1.0817.

While it found support above $1.08, EUR/USD remains in a broader downside wedge after threatening to break above $1.10 earlier in the week.

The primary catalyst for that trend was a renewed round of strength in the US dollar, as currency markets adopted a tone of caution in the wake of some poor data prints which demonstrated the impact of the Covid-19 pandemic on the global economy.

That caution stood somewhat in contrast to the stock market, as US stocks rose while Dow futures jumped sharply ahead of Friday trade.

In an indication of more risk appetite in Asia on Friday, the Aussie dollar outperformed across the board while the US dollar edged lower against most major pairs.

Stocks upbeat, currency markets more cautious

The positive sentiment extended to regional stocks, as the major indices in China, Japan and Australia all pushed higher to end the week.

It continued the recent divergence between stock prices and the real economy, as investors shook off a 6.8% fall in China's gross domestic product (GDP) – the country’s first decline in economic growth since 1976.

Instead, optimism flowed through from US markets, following the first tentative plans from US lawmakers to begin reopening the economy as well as more updates on the success of an antiviral medication produced by pharma company Gilead Sciences.

While risk appetite flowed into stocks, currency markets remained more cautious ahead of a relatively quiet day of data in the US, UK and Europe to end the week.

With the euro holding steady in its current trading range, major Eurozone economies continued to take tentative steps towards a shared financing strategy, after talks fell through last week.

In comments to the Financial Times on Thursday, French president Emmanuel Macron advocated strongly for the idea and said he remains in constant contact with representatives from Germany and the Netherlands – wealthier member states who initially pushed back against the proposed terms of the combined facility.

Without a shared effort to fend off the economic impact of Covid-19, Macron said the European Union (EU) runs the risk of falling apart amid the ongoing rise of populist movements that advocate for a return to nationalism.

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