The FX market was extremely quiet the day after Christmas, with the U.S. being the only major center open. The dollar was a touch easier as equity markets were supportive, but 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. EUR-USD managed to move to 1.3250 from lows under 1.3200, while USD-JPY was steady over 85.25 in light dealings.

[EUR, USD]
EUR-USD tripped up some light buy stops over 1.3220, taking the pairing to 1.3254 highs in very thin trade. More stops were noted from 1.3260, and a move above there would likely bring last week's trend highs if 1.3308 back into focus. Eventually though, sellers emerged in front of the stops, resulting in a quick slide back under 1.3220. Activity dried up into the lunch hour.

[USD, JPY]
USD-JPY remained near trend highs, after touching 20 month highs over 85.70 in N.Y. trade on Wednesday. Japan PM Abe said bold monetary policy will be accompanied by flexible fiscal policy and a growth strategy to encourage private investment, while pursuing welfare and sales tax reforms. Abe was approved as PM today and after he took office he warned that "Japan won't have a future and won't be able to restore fiscal health without a strong economy." Headlines from Japan Finmin Aso crossed the wires, though had little market impact. He said he has been instructed by the new PM to establish inflation targets, along with crafting and implementing measures to deal with a strong yen. In addition, Aso said he was instructed to craft an additional budget, and to be mindful of fiscal reform goals.

[GBP, USD]
Cable was steady near 1.6125 in Asian, though managed a move over 1.6170 in early N.Y. trade. The move came largely in sympathy with EUR-USD's rise, though activity overall was muted. 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 0.9110 in very light trade. 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 was underpinned in thin N.Y. trade on Wednesday, after it made its way back over the 0.9900 mark and extended to 0.9950 on Friday. 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.