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Forex: EUR/JPY rallies above 126.00

The almost 200-pip European morning rally was capped at 125.97 high on EMU PMI data and entered a profit taking stage ahead of EMU retail sales. Then, the market returned to the upside and, after a hard time at breaching the 126.00 mark, the EUR/JPY broke higher. The cross is at 126.33 high, as of writing.

The EMU PMI Composite rose from 47.2 to 48.6 in January, beating consensus of 48.2. Services PMI came in at 48.6 too. The German PMI Services is more expansionary, from 52.0 to 55.7 in January, beating consensus of 55.3.

EMU retail sales disappointed by falling further, from -1.9% (revised from -2.6%) to -3.4% in December (YoY), instead of improving to -1.1% as expected. On the month, sales contracted -0.8%, instead of the -0.3% consensus.

Mataf.net analysts point to resistances at 126.65. On the downside, supports might be found at 124.15, 123.25 and 122.95.

Forex Flash: Reasons for optimism in Iberia – UB

German Chancellor Angela Merkel did her very best to express support for her beleaguered Spanish counterpart on Monday in Berlin. Although her fiscal prognosis for Spain may be open to question, she did state that 'Spain's exports are posting their best performance for 30 years'. According to Research Analyst Gareth Berry at UBS; “Debatable in practice, basic theory in FX stipulates that improving exports helps the trade balance, and the consequent balance of payments improvements should also help the currency.”
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European markets up on earnings and EMU PMI

The January EMU PMI Composite rose from 47.2 to 48.6 in January, beating consensus of 48.2. This coupled with upbeat earnings reports in the Eurozone allowed the major indexes to edge higher on Tuesday. The German DAX 30 (+0.30%), the French CAC (+1.00%), the Italian FTSE (+1.24%), and the Spanish IBEX 35 (+1.85%) are performing well, like the Scandinavian indexes and the British FTSE 100 (+0.73%).
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