Euro Advances As Eurozone Private Sector Activity Hits Near 12-Year High

The euro strengthened against its key counterparts in the European session on Monday, as the euro area economy expanded at the fastest pace pace since mid-2006 in January.

Final data from IHS Markit showed that the composite output index rose more than initially estimated to 58.8 in January from 58.1 in December. The flash score was 58.6.

The headline index has signaled expansion for 55 successive months and the latest score was the highest since June 2006.

German final composite PMI came in at 59.0 versus 58.9 in December and the flash 58.8. Likewise, the services PMI improved more than estimated to 57.3 from 55.8 a month ago.

That said, German political tensions kept the currency's gain in check. Investors became nervous after coalition negotiations between German Chancellor Angela Merkel's conservative party and the Social Democrats broke down over the weekend.

The euro traded mixed against its major opponents in the Asian session. While it rose against the greenback and the pound, it held steady against the franc and the yen.

The euro reversed from an early low of 1.2424 against the greenback, rising to 1.2475. The euro is poised to find resistance around the 1.26 level.

The single currency advanced to 0.8837 against the pound, its strongest since January 19. This may be compared to a low of 0.8812 hit at 5:00 pm ET. On the upside, 0.90 is possibly seen as the next resistance level for the euro.

Survey data from IHS Markit showed that the U.K. services PMI dropped more-than-expected to 53.0 in January from 54.2 in December. It was forecast to fall to 54.0.

The 19-nation currency bounced off to 1.1597 against the Swiss franc, from a 4-day low of 1.1573 hit at 3:30 am ET. Continuation of the euro's uptrend may see it challenging resistance around the 1.17 area.

Having fallen to a 4-day low of 136.62 against the Japanese yen at 3:00 am ET, the euro reclaimed some of its lost ground and was trading at 136.94. The next possible resistance for the euro is seen around the 139.00 level.

Survey by IHS Markit showed that Japan's service sector activity expanded at a slightly faster pace in January.

The seasonally adjusted services purchasing managers' index, or PMI, rose to 51.9 in January from 51.1 in December.

The euro rose back to 1.7054 against the kiwi and 1.5706 against the aussie, from its early lows of 1.7001 and 1.5669, respectively. The currency has set a 1-1/-2 month high of 1.7102 against the kiwi and more than a 2-month high of 1.5758 versus the aussie in early Asian deals. If the euro rises further, it may target resistance around 1.72 against the kiwi and 1.60 against the aussie.

The common currency advanced to 1.5484 versus the loonie, off its previous low of 1.5451. The euro is seen finding resistance around the 1.56 level.

Looking ahead, U.S. ISM non-manufacturing composite index for January is set for release in the New York session.

At 11:00 am ET, the European Central Bank President Mario Draghi will testify on the ECB's Annual Report for 2016 before the European Parliament in Strasbourg.