The dollar traded lower in morning trade, taking EUR-USD through buy stops at 1.3000 following stronger pending home sales data. Later though, the greenback retraced higher on the back of more fiscal cliff fears. Congressional leaders on both sides of the aisle blamed the other side for the impasse in negotiations, while their was talk from the GOP side that the White House is holding up progress. Regardless, stocks gave back their gains, leading the dollar higher. Elsewhere on the economic front, jobless claims were near expectations and had little impact, while the Q3 GDP revision missed expectations by a tenth, coming in at 2.7%. FX trade is likely to remain skittish until the U.S. fiscal issues are somehow hammered out.

[EUR, USD]
EUR-USD tripped stops above 1.3000 after the surge in pending home sales. Once filled EUR ran into a wall of heavy offers over 1.3010 and traded back to 1.2975, which is likely to reinforce range bound trade. There are a heavy congestion of offers from sovereigns and short term players into 1.3030 and larger orders at 1.3050. Further topside failures are likely to see longs reduce positions and it could ebb back towards 1.2950. Later in the session, the dollar popped higher after House Speaker Boehner reversed course on his "optimistic" comments on the fiscal cliff talks yesterday, now saying he is "disappointed" with the progress. Equities shed their gains, helping to take EUR-USD down to 1.2945 from 1.2975. The euro again failed to hold the 1.3000 mark, and without a bounce overnight, it appears EUR-USD may be on its way lower near term.

[USD, JPY]
Option expiries curtailed USD-JPY moves into the N.Y. open, though sellers stepped in ahead of the 10:00 EST options cut. Larger than average strikes were noted at 81.80, 81.90, 82.00 and 82.25. The pairing traded down to the 81.90 level at expiry time. The pairing recovered back over 82.10 into the London close, and was able to hold onto the 82.00 handle through the afternoon. There was more dovish rhetoric from election poll leader LDP Abe today, as well as PM Noda and BoJ board member Shirai, but the risk of a weaker yen is now fully priced ahead of the mid-December election and USD-JPY is no longer a one-way bet.

[GBP, USD]
Cable was boosted to the 1.6045 area on better risk appetite, but further gains were restrained by a decent bid in EUR-GBP. The cross moved over 0.8100 amid month end related demand. There was talk that up to EUR 3 bln may be bought in the next 24 hours and this has added to EUR supportive flows and also held GBP back. The U.K. macro picture is also broadly negative, with BoE lending data painting a weak overview of consumer lending. However, foreign investors continue to show appetite for gilts in October, with the fourth consecutive month of purchases (GBP 4.3 bln), though demand is down from last year. The underlying tone for GBP should be on higher levels if risk appetite holds up, but for cable, resistance from 1.6065 to 1.6100 barriers may cap, along with EUR-GBP demand.

[USD, CHF]
USD-CHF is still being influenced by external factors and headed back to 0.9275 after a pick up in global equity markets fueled a pullback in short term dollar long positions. EUR-CHF is still trading a tight range just under 1.2040, though a return of local name bids reappeared after it drifted to 1.2030 yesterday, which were its weakest levels since early September. The swissy saw a muted reaction to the better Swiss GDP outturn, but the economic outlook is still a challenge given the eurozone difficulties. On an intra-day basis, we anticipate a USD-CHF test of good support into 0.9250-55, but overall range bound action is likely to continue, with offers capping towards 0.9330 and into 0.9350.

[USD, CAD]
USD-CAD was on a bit of a roller coaster ride in North American trade, though it did remain inside of well worn ranges, between 0.9910 and 0.9940. Mixed industrial and raw material prices had little impact on the CAD, and as usual, trade was largely driven by risk taking levels. The pairing ran into sellers ahead of 0.9950, where option backed offers were reported, while a solid band of corporate bids remained in place at 0.9900, limiting downside momentum. CAD$ should continue to trade off stock market developments in the very near-term, though Friday's Canada GDP release and next week's BoC will deter heavier CAD$ long position building.