The FX market was dominated by a EUR-USD retracement after it was unable to sustain 1.3000 in Asia. A Greek aid agreement was widely expected and EUR toppled as it was already priced in after last week's squeeze from 1.2737. Adding traction to the move was anticipation of month end dollar demand from U.S. fund booking closing. JPY also posted a modest correction after EUR-JPY ran into a very strong offer ahead of 107.00 and pulled back to 106.15, which left USD-JPY over the 82.00 area. There was further policy rhetoric from both the LDP and DPJ overnight, but it had only a limited impact on JPY, which suggests that specs may be unwilling to extend yen shorts further ahead of the mid-December election. Elsewhere, GBP was stable after U.K. Q3 GDP came in at 1% q/q as expected, while the financial press continued to digest BoC Carney's appointment as the new Governor of the BoE from next June. There is a full calendar to digest in the U.S. The highlights include durable goods, chain store sales and consumer confidence.

[EUR, USD]
EUR fell after it was unable to add to overnight gains. There were reports of speculative fund activity via EUR-JPY, which ran into a strong offer ahead of 107.00, while EUR-USD met profit taking and option flows into 1.3000 since the European open. A directional buyer was noted into 1.2955-60, but light stops between 1.2930 and 1.2940 may be vulnerable amid talk of dollar repatriation into month end. The OECD also cut growth forecasts for 2012 and 2013, which didn't help sentiment. It sees risk of a new major contraction in developed economies and called for monetary easing in Europe, Japan, China and India, while cited risks from the U.S. fiscal cliff. The EUR pullback was widely expected from cycle traders, but expect buyers to layer bids towards 1.2900. However, a deeper move through 1.2875 would negate the recent uptrend.

[USD, JPY]
USD-JPY posted a run up to 82.30 in late Asia after specs reacted to more pro-policy easing comments from LDP's Abe and DPJ. The ruling DPJ election manifesto called for joint government and BoJ effort to beat deflation, but did not mention a change of BoJ law. The topside in USD-JPY is capped by Japanese hedging activity, while there is talk of potential repatriation flows related to large U.S. coupon and redemption payments ahead of larger option related selling over 82.50. Cross-JPY flows are still supportive amid reports of unhedged long term investor demand for foreign assets, though a sharp build up of speculative positioning may also begin to chip away at momentum. EUR-JPY eyes large offers from 107.20 to 107.50 and AUD-JPY is also capped into 86.50.

[GBP, USD]
Cable is supported on dips since it broke up through 1.6000 and extended to 1.6050 in thin holiday trade last Friday. News that BoE Carney will take over from BoE Governor King next June was taken as a positive by London traders and provided some support on the periphery, along with conjecture that London real estate could benefit after China gave the greenlight for insurance companies to invest in overseas assets. Cable fell short of the 55-dma at 1.6065 in early Europe, which lies ahead of mooted option barriers and it ebbed to 1.6015 lows into the Q3 GDP release, which was unrevised at 1% q/q. Meanwhile, Pimco's Amney said he sees a good chance that U.K. will lose its AAA rating and was not enormously keen on gilt, though expected to BoE to do more QE3.

[USD, CHF]
USD-CHF found a modicum of support on dips. Natural demand emerged into 0.9250 in early Asian trading. The technical backdrop had rolled over to the downside after it dropped sharply last week, but EUR is struggling to sustain higher levels and there are expectations of dollar inflows into month end. The dollar pairing could make back between offers at 0.9300 and 0.9330 on corrective action, though selling pressure is widely expected to increase towards the mid-0.93s. EUR-CHF moved briefly over 1.2050 in early trade after the agreement on Greek aid, but ran into selling pressure on upticks, leaving it little changed just in front of 1.2040.

[USD, CAD]
USD-CAD headed back towards 0.9915 after short term accounts faded yesterday's rally over 0.9960. News of BoC Carney's departure from the BoC next June weighed a touch on CAD$, but the broader risk backdrop was the more telling influence. News that a deal for Greece had been reached was a positive for risk, which boosted stocks, commodities and in turn CAD$, leaving the dollar pairing close to natural order flow at 0.9900-10. However, into Friday's Canadian GDP release and next week's BoC meeting further CAD$ strength may start to wane. Buyers are tipped at 0.9885 and 0.9875. Offers remain from 0.9980 to 1.0000.