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EUR/USD holds gains in Asian trade after greenback support gives way

EUR/USD pushed back towards $1.10, after a breakdown in support for the dollar. The euro held its gains in Asian trade, entering Friday on global markets trading slightly above $1.095.

EUR/USD hits support amid greenback sell-off

Despite facing downside pressure for most of the last two weeks, EUR/USD still managed to find support above $1.08 for most of that period.

And after trading near its familiar range at the $1.085 level, it was USD bulls who blinked first as a selloff in the greenback sparked a 1% rally in EUR/USD to end the month.

The move came prior to the daily 4pm currency fix in London markets, and didn’t appear to have a specific catalyst.

As USD support faded, EUR/USD pushed to a two-week high above $1.097 before easing back slightly. The move held throughout Asian trade, with the euro holding above $1.095 as UK traders got to the desk on Friday morning.

The greenback sell-off followed the latest European Central Bank (ECB) policy announcement, where the central bank left rates unchanged at emergency levels and announced a new lending program to help support the economy.

Earlier on, eurozone gross domestic product (GDP) figures for the March quarter showed a contraction of 3.8% from the previous quarter – the largest quarterly decline on record.

Risk sentiment fades in Asia to end the week

Despite the sell-off in the USD – which has largely traded as a safe-haven currency during the crisis – the start of a new month brought with it a renewed round of risk-off sentiment in Asian markets.

The recent rally in the AUD came to sharp halt, as AUD/USD fell by almost 1% to close back below $0.65 on Friday.

In addition, stock markets in Australia and Japan got sold off sharply, with stock futures in the US, UK and Europe both pointing around 2% lower to end the week. Markets in the major European economies are closed for the Labor Day holiday.

If risk-off sentiment extends into global markets, it could provide some support for the greenback.

However, by the conclusion of Asian trade on Friday the US Dollar Index was little changed at one-month lows near the 99 level.

Key data in the US will be led by ISM Manufacturing purchasing managers index (PMI) numbers for April, with the median forecast for a print of 36.9.

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