The FX market was extremely quiet on Christmas Eve in holiday thin trade. The dollar was a touch easier as equity markets were supportive in Asia and Europe, but in the U.S., fiscal cliff uncertainty continued to cast a shadow. USD-JPY maintained firmer levels and probably has the best chance of an extended move into year end after incoming Japan PM Abe kept the pressure on BoJ. He said he will revise the BoJ Act if it did not adopt a 2% inflation target. Market attention will remain on the political scrambling around the precipice of the U.S. fiscal cliff. House leader Boehner said he is still prepared to work with the Democrats after it shelved a "Plan B" vote late last week. On Boxing Day, while Europe is closed and in the U.S. several second tier releases are due, but unlikely to be market movers.

[EUR, USD]
EUR-USD moved back over 1.3200 and extended to the 1.3230 area in very thin trade. The supportive equity market backdrop was the catalyst for light dollar supply. However, the lack of interest in holiday thin trade exacerbated the move up from 1.3170 ahead of good bids at 1.3150-60 and backed up by a supportive technical backdrop. On the topside offers are noted from 1.3230 to 1.3250 ahead of a return to last Wednesday's highs over 1.3300.

[USD, JPY]
USD-JPY registered trend highs over 85.00 in wafer thin trade. The combination of U.S. fiscal cliff anxiety and expectations of more BoJ policy stimulus fueled broad yen weakness. Incoming PM Abe vowed to revise BoJ law in order for it to adopt a 2% inflation target and suggested that USD-JPY should be around Y90.00 in weekend comments.

[GBP, USD]
Cable steadied into the 1.6150 area overnight and moved back into 1.6200 after equity markets posted modest gains. The sterling backdrop soured on Friday after data released underlined just how difficult it will be for the U.K. government to meet its fiscal target and there are increased expectations of a sovereign downgrade. Growth was downgraded a notch to 0.9% q/q, while borrowing came in worse than expected. The data completed reaffirmed the U.K. economic picture of sticky inflation, anaemic GDP performance and a government falling behind its fiscal targets.

[USD, CHF]
USD-CHF headed back towards support from 0.9130 after firmer equity markets fueled an easier dollar tone. Overall, activity was light, which exacerbated the downturn. The technical backdrop does still point to a test of early May lows around 0.9050 and then the 0.9000 area from late April, but support around 0.9100 may mark the bottom in holiday shortened trade. Since the break lower late last week movement has been more patchy as fiscal cliff negotiations and thin year-end trade limits directional bias.

[USD, CAD]
USD-CAD is underpinned after it made its way back over the 0.9900 mark and extended to 0.9950 on Friday. It threatened higher levels in early Asia, but drifted back to 0.9920 after 0.9950 held. It looks likely that CAD$ will maintain a heavier tone due to U.S. fiscal cliff uncertainty, while the further slowdown in Canada CPI Friday also raised pressure on the BoC to abandon its tightening bias. Natural support should emerge towards 0.9900, while the 10-dma at 0.9875 is another potential support region. There are several resistance levels between 0.9955 and 1.0000, which may see some range players turn long positions.