FX markets appear to be dominated by countertrend retracements and thus a return to the norm is expected to resume as the day progresses.

Source: Bloomberg

EUR/USD trend line support in view
EUR/USD has been retracing lower this morning as a continuation of the trend seen late into Friday. The failure for Friday to regain the $1.1042 resistance level was telling and brings questions as to the longevity of this rally.

For now, we remain somewhat in limbo, where a closed hourly candle above $1.1042 would bring a bullish outlook and a closed hourly candle below $1.0925 would bring a more bearish outlook. The pair has to contend with both trend line support and $1.0934 support levels before trying to reach the crucial $1.0925 neckline. Conversely, resistance levels on the way to $1.1042 are $1.0981 and $1.1031.

GBP/USD retracement unlikely to last
The bullish outlook remains for GBP/USD, despite a somewhat weak start to the morning today. The uptrend in play throughout December is clearly still in play and thus it is a case of watching to see when the uptrend will resume.

Support levels which could potential push price higher are $1.5159, $1.5125 and trendline support – currently $1.5138. Resistance levels of note upon breaking higher would be $1.5202 and $1.5241. This bullish view remains unless price posts an hourly close below $1.5111.

USD/JPY resurgence following selloff
USD/JPY is moving sharply higher this morning, following off from a strong selloff on Friday. With price having broken below the ¥122.30 and now ¥121.07 support levels, this current resurgence is unlikely to last and thus it is worthwhile looking for bearish signals within this rally.

Resistance levels of note are ¥121.87 and ¥122.02, while support levels are at ¥121.24, ¥121.07 and crucially ¥120.58. This bearish view would only be negated with an hourly close above ¥122.30.

USD/CAD weakness temporary
USD/CAD is selling off sharply, in a very clear countertrend move. Unlike USD/JPY and GBP/USD, this story is of dollar weakness and thus it has more to do with how oil prices have weakened the CAD.

With expectations of a trend continuation in oil (weakness) and thus USD/CAD (strength), there is likely to be another move higher for USD/CAD in the near future back towards C$1.3758. Thus this current move looks like a temporary retracement lower which would be expected to bring another rally in the near future.

Key support levels of note are C$1.3650 and C$1.3631, while resistance beyond C$1.3758 is difficult to find. This bullish view holds unless we see an hourly close back below C$1.3631.

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