The FX market was extremely quiet in Asia. Activity was limited ahead of the FOMC, while pre-holiday trade is also starting to take hold as market participants await on U.S. fiscal cliff negotiations. Reuters reported after yesterday's N.Y. close that talks had picked up pace, but the stalemate was confirmed by both sides yesterday. AUD dipped to 1.0465 after a poor NAB business conditions/confidence reading, which dropped to the lowest levels since Q2 2009. EUR and Cable were supported ahead of 1.2950 and 1.6050, respectively, amid central bank diversification on Monday, along with short covering due to oversold technical studies. JPY consolidated after sources told Reuters that BoJ was likely to ease by another Y5-Y10 tln next week. Movement in Europe will come from Spanish and Greek bill auctions results, while Greek debt buyback is due to end by midday in Europe.

[EUR, USD]
EUR-USD firmed up from 1.2930 and extended through 1.2960 amid stop loss buying after sovereign demand went through. Japanese demand for EUR-JPY from 106.50 to 106.70 was a positive, though once filled follow through was contained by larger offers from 1.2970-80 and there are also good orders tipped from 1.3000. The underlying tone for the EUR is still negative, which should encourage selling pressure on upticks, but reserve management flows are expected to pick up out of Asia and could effectively put a near-term bottom in place, with 1.2880 still a key level on the downside. Buyers are tipped at 1.2920-30, 1.2900 and ahead of 1.2880.

[USD, JPY]
USD-JPY was unable to sustain yesterday's run higher due to an overhang of exporter offers from 82.50 to 82.70, along with outstanding option related hedging pressure. News that BoJ was likely to ease by another Y5 to Y10 tln is largely a given after a Japanese recession was confirmed on Monday. Interest is still on the low side ahead of the FOMC outcome and next Sunday's election, which LDP are broadly expected to win. As we move into the weekend more yen shorts could be put on, but speculative positioning is still at multi year highs and could restrain momentum to a degree. Good bids are still tipped into 82.00-20, while a double bottom is noted at 81.70 ensuring that the downside is well supported. Note, there are still large outstanding option barriers from 82.90 to 83.50, which are rolling off on Friday.

[GBP, USD]
Cable was underpinned ahead of 1.6050 since yesterday's N.Y. open. Reserve management flow, option hedging and M&A related activity put a floor in place despite the underlying bearish tone. Cable broke down last week on poor fundamentals and a weak technical backdrop. It seems likely that intra-day accounts will sell upticks ahead of the 1.6100 pivot in the near-term, though a further pick up in risk appetite could squeeze out weak shorts higher up. There are no new fundamental developments to digest. U.K. data this week should reaffirm triple-dip recession risk, which backs expectations for further stimulus in 2013. Under 1.6000 there are good support levels from 1.5990 to 1.5950-60.

[USD, CHF]
USD-CHF hovered over 0.9320 bids after it pulled back from 0.9370 on Monday. However, it has maintained largely all of the recent gains following the breakdown in eurozone sentiment. The risk backdrop is still likely to influence near-term action and bias is on last week's highs around 0.9380 and offers from 0.9400. Buyers are seen from 0.9320 in the near-term and through 0.9300. EUR-CHF is still on the defensive as eurozone uncertainty drove funds into Swiss safety, leaving the cross under 1.2100 after it was unable to sustain the sharp move over 1.2150 last week. The SNB should reaffirm its commitment to policy stimulus at the end of this week, including the lower limit at 1.2000.

[USD, CAD]
USD-CAD edged into the 0.9860 area in Asia, but ranges remain extremely narrow. Like other major dollar pairings, there was minimal interest on Monday and today, though the CAD has held on to last week's post-jobs report gains. The Canadian jobs surge supported retention of the BoC's tightening bias. In addition, the U.S. jobs report buoyed the CAD as well. Progress on USD-CAD's downside is slow due to support from 0.9865 to 0.9850, but Friday's break down should support selling pressure on upticks and offers are widely tipped from 0.9900-10 and 0.9940-50.