The dollar and yen were supported on dips after equity markets struggled followed Monday's weak U.S. ISM data and the U.S. fiscal cliff impasse. AUD bucked the intra-day trend after the RBA's 25 bp rate cut fueled profit taking by shorts, leaving it a bit higher on the session. EU's Juncker said it will reconvene on December-13 to make the final decision on disbursing Greece aid. Meanwhile, Nikkei News cited a QUICK Corporate survey, which said that just over 40% of bonds traders expected LDP's 2% inflation target to be implemented. Elsewhere, the U.K. BCC raised its 2012 GDP forecast to 0.1% from 0.4% previously, but cut the 2013 outlook to 1% from 1.2%.

[EUR, USD]
EUR-USD started the session ahead of 1.3050 and made an attempt on higher levels, but the pick up in risk aversion capped gains from 1.3065 ahead of yesterday's peak around 1.3075. A pick up in dollar demand fueled a move back towards 1.3045, where a wall of support put a floor in place. Bias still remains on the topside after Monday's break higher and support is noted from 1.3040 and into 1.3000-20. Further stops are tipped above 1.3075 and through large 1.3100 barriers.

[USD, JPY]
USD-JPY traded on the heavier side just in front of 82.00 after yesterday's inability to sustain higher levels and headwind via the JPY crosses after the risk backdrop soured. The BoJ policy outlook should still encourage yen sellers on upticks and USD-JPY demand is tipped from 82.00 down to recent lows at 81.70, but a break out on the topside may be difficult given market positioning, as well as large outstanding 83.00 barriers.

[GBP, USD]
Cable is skewed to higher levels after it broke up through 1.6100 on Monday. Despite the pick up in risk aversion overnight it has held up well as the recent rally encourages natural demand on dips. We think this tone is likely to continue in the near-term with buyers noted from 1.6070 to 1.6050 and underneath 1.6030. Over 1.6100 there is hedging activity ahead of 1.6125 and outstanding barriers from 1.6150 that are likely to cap gains.

[USD, CHF]
USD-CHF has lacked direction since it broke down last week and traded into the 0.9250 region. However, there is no progress on the downside despite dollar weakness elsewhere. Long standing bids into 0.9230 and ahead of 0.9200 encourage good bids and is likely to keep ranges on the narrow side for now. On the topside, offers lie from 0.9280 to 0.9300 from interest that was lowered last week from short term accounts playing the range.

[USD, CAD]
USD-CAD headed back over 0.9950 after risk appetite soured on poor U.S. ISM data and the U.S. fiscal cliff impasse. Overall, USD-CAD remains a range trade and we see little chance of a break of range ahead of the North American open as the focus is now on the BoC policy announcement. Bids are noted from 0.9900 and below and offers are tipped from the 0.9960 area. The BoC are expected to leave rates at 1% and maintain its language regarding eventual withdrawal of stimulus that was seen in September.