The dollar and yen consolidated at softer levels after risk appetite held up. Larger flows were minimal due to month end, which kept ranges relatively tight ahead of the N.Y. open. There is potential for more choppy action in N.Y. due to more headlines related to fiscal cliff negotiations. S&P said overnight it expected negotiations to go right to the wire and we may be in for a period of sharp price swings as large accounts move to the sidelines into year end. EUR threatened a topside break, but met strong offers from 1.3030, leaving it close to today's 1.3000 expiries. JPY added to overnight losses, which lifted USD-JPY into 82.70, where option protection was noted ahead of outstanding 82.90 and 83.00 structures. In North America the data calendar includes U.S. personal income and Chicago ISM, along with Canada Q3 GDP.

[EUR, USD]
EUR-USD lacked upward momentum. After posting intra-day highs of 1.3028 in early Europe it edged lower amid strong offers from a Middle Eastern account and Asian investors. Orders are heavily congested up to 1.3050 and there are large 1.3000 option expiries that have also attracted hedging activity. However, the market is still skewed for a potential topside break, which has fueled good demand for EUR calls between 1.3050 and 1.3100 due to underweight gamma exposure higher up. Eurozone unemployment reached a record high of 11.7%, but it did not have a lasting impact on EUR, which is taking its influencing from short term repositioning rather than data releases today.

[USD, JPY]
JPY added to losses in Europe amid talk of strong flows related to the Softbank-Sprint deal. Flows were evident in EUR-JPY and USD-JPY via one major Japanese house in Asia and there is speculative interest from European named that reinforced the underlying trend. A large One-Touch expiry in USD-JPY at 82.90 has exerted an influence on the intra-day market, though the payout is reportedly massive and we would anticipate very strong protective offers, as well as an influence from long standing 83.00 Reverse Knock Out structures from specs that were trying to pick a top in USD-JPY. Bias for both EUR-JPY and USD-JPY will remain with the topside, but progress is likely be slow given these influences, along with key technical resistance towards 108.00 in the cross.

[GBP, USD]
Cable still struggled to break higher after it met good offers from 1.6060 in early Europe. It pulled back towards 1.6030 as range players sold the early move to 1.6062. EUR-GBP is stable around 0.8100, with corporate offers into 0.8120 offset by talk of month end related demand. The bias for EUR-GBP will remain with the topside amid risk of further EUR short covering, while Cable is supportive on the daily chart, but offers are heavy towards 1.6100 and may result in more range bound action, with interest on the low side at month end.

[USD, CHF]
CHF is supportive today, largely due to the drop in USD-CHF. The dollar pairing moved through key support at 0.9250 in Asia as risk appetite improved and maintains a heavy tone. Good two way action is noted around this region a this represents a long term trend line, ahead of good support levels layered into 0.9200 that supported in mid-October. EUR-CHF is trading close to 1.2040 after local names reset bids at 1.2030-35 after it drifted lower earlier in the week. The Swiss KOF leading indicator wasn't a market mover, but has now declined for the second consecutive month, which supported expectations that the Swiss economy may slow into Q1 2013.

[USD, CAD]
USD-CAD is still inside well worn ranges, between 0.9910 and 0.9960. The pick up in risk appetite in Asia fueled selling pressure into 0.9935, but there was no appetite to test the solid band of corporate bids at 0.9900, which have limited downside momentum for several sessions. CAD$ should continue to trade off stock market developments in the very near-term, though today Canada GDP release and next week's BoC will deter heavier CAD$ long position building in Europe.