Market sentiment was positive on U.S. fiscal cliff optimism, but volumes remained low overall, which kept the G10 FX confined to the recent trading range. The USD and JPY were a bit easier on speculative flows, which lifted EUR back towards recents high just below 1.3200, where option barriers put a top in place. Cable edged up through 1.6220, but saw no follow through due option related flows. Meanwhile, JPY consolidated recent losses ahead of the two-day BoJ meeting, where an increase in the asset purchase target is widely expected. Elsewhere, SEK gained on profit taking after the Riksbank cut rates by 25 bps to 1% and projected unchanged policy throughout 2013.

[EUR, USD]
EUR-USD firmed up as standing bids ahead of 1.3150 out of Asia put a floor in place. Steady upside progress was seen in thin trade, which helped the pair up to the 1.3190 area, where offers were noted during Monday's Asian session ahead of 1.3200 barriers. There was no eurozone data to focus on, but Spanish refinancing costs fell again at today's bill auction, which was a positive barometer for sentiment in the region and reinforced the intra-day tone. Further positive guidance included stable equity markets in Europe after a positive performance in Asia on U.S. cliff hopes. EUR bias is on levels over 1.3200. Buy stops are noted at 1.3210 and offers lie from 1.3230 to 1.3250.

[USD, JPY]
Large expiries should contain USD-JPY movement ahead of tomorrow's two-day BoJ meeting. Strikes are noted at 83.50, 83.75 and 84.00, which will reinforce overnight ranges. Buyers are noted from 83.80 to 83.50, while over 84.00 order congestion will cap from 84.20 up to 84.50 option barriers. The BoJ are widely expected to raise the asset purchase target and could also announce a new scheme aimed at increasing bank lending. The Bank is also under pressure from Abe to raise the inflation target to 2%, which was one of the election mandates laid out. Shirakawa met with Abe today for a short meeting, but did not comment on the content due to the media blackout, which is the usual protocol this close to a central bank policy decision.

[GBP, USD]
Cable is grinding through offers that lie from 1.6220 to 1.6250. European names are keying off a supportive equity market tone in slow trade. U.K. CPI and PPI data did not change the market tone, with CPI right on expectations and PPI a bit easier than expected. The intra-day picture is positive for Cable and dip buying is likely to continue in the near-term. Buyers are noted into 1.6200 and below, though we are in territory where order congestion has picked up, along with option expiry congestion at 1.6200 and outstanding barriers from 1.6250, which will keep ranges tight.

[USD, CHF]
USD-CHF consolidated recent losses, trading underneath the 0.9200 level after last Friday's break lower. Natural demand into 0.9150 limited the downside on Monday and similar flows were noted since today's European session got underway. Market sentiment remains positive, which sets up the dollar pairing for a test of early May lows around 0.9050 and then the 0.9000 area from late April. However, into the year-end price action may become disjointed and limit directional bias. Sellers are expected to use the 0.9200 level as a near-term pivot point for short term positions, while more resistance is tipped around 0.9220-30.

[USD, CAD]
USD-CAD remained close to 0.9840 during the European time zone. It drifted as low as 0.9833 in Asia on positive risk appetite, but backed up in Europe as markets lacked follow through. Equity and oil price gains aided the loonie since the start of the week, leaving bias on an eventual test of interest into 0.9825 and 0.9800, though trade was said to be thin.