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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.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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