Market Outlook
First day back from holiday trading and markets remain thin as most players slowly make their way back to the office. Japan's capital markets are closed until tomorrow contributing to illiquid conditions. Major event risk over the weekend - the natural gas crisis between Russia and Ukraine - has been resolved for the time being taming the earlier volatility of the Asian open.

EUR/USD - Euro rallied through the 1.1900 figure in early European trade but failed to hold the handle as the pair met stiff resistance from 20 period SMA which rests at 1.1881. Overall the pair remains range bound trapped within the 1.1775 - 1.2050 zone as it continues to consolidate. Most studies remain neutral albeit with a slightly bullish bias especially from Slow Stochastics which is showing a nascent curve upward. Ultimately however only a clear break and hold of the 1.2000 level to the upside or conversely a breakdown of the 1.1775 support line would signal a strong directional move. At present the euro bulls appear to have the upper hand

USD/JPY - Japanese Yen bulls managed to briefly push the pair below the 117.00 level but it quickly snapped back by bargain hunting dollar longs. The pair continues to hover near its short term lows of 115.50 as price action absorbs the massive sell off of two weeks back. Indicators remain in conflict with MACD just starting to curl upward but Slow Stochastics indicating a mild overbought status. The pair may want to retest its recent lows before establishing a firm near term bottom. However, break through the 115.50 level would open the possibility of a move all the way back to the 112.50 zone.

GBP/USD - The pound made a strong recovery in early London trade today barreling through the 1.7300 handle. If the recent lows of 1.7126 hold the pair may have carved out a short term bottom with both MACD and Slow Stochastics curling upward. With RSI in neutral territory and next resistance fully 500 points higher, cable bulls have plenty of room to run the unit higher. Most immediate barrier is the 1.7407 high formed off the doji on 12/28/05. If sterling can take out that price level with conviction and move higher is probable.

USD/CHF - USD/CHF appears to have hit clear resistance at the 1.3150 zone as the series of doji candles from last week is resolving its way to the downside with pair falling through the 1.3100 figure. MACD though positive is losing upward momentum with the histogram making lower highs while Slow Stochastics shows a curl downward after spending some time in the overbought zone. Only a strong break above the 1.3200 level would invalidate the short bias here with 1.2850 now looking to be a natural target for franc longs.

Sam Shenker is a Technical Currency Analyst for FXCM.