Activity is low ahead of New Year holidays, while the lack of progress on U.S fiscal cliff negotiations also limited risk taking. Asian equity markets were choppy, but ended the session at higher levels overall after China HSBC flash manufacturing PMI jumped to its best levels since May 2011, while the China Daily ran an opinion piece from a China economy expert that predicted 2013 growth above 8%. U.S. fiscal cliff anxiety kept the dollar and the yen on a supportive footing, but continued evidence that China is recovering limited momentum. In Europe, activity is extremely low as most European centers are closed for New Year holidays. The dollar picked up a bit from the London open as the U.S. is close to going over the fiscal cliff and only a lack of market participation has stopped it from trading at much higher levels. EUR is trading close to 1.3180, USD-JPY is hovering around 86.00 and Cable is trading ahead of 1.6150.

[EUR, USD]
EUR-USD is still trading either side of 1.3200 despite the risk that the U.S. may go over the fiscal cliff. The dollar picked up, but once EUR traded into 1.3180 there was no follow through. Standing bids are noted at 1.3180 to 1.3160, while 1.3150 is also good support level on the daily chart, which is protecting sell stops below. Offers have been placed from 1.3240-50 and increase in size from 1.3280 to 1.3300.

[USD, JPY]
USD-JPY is still trading close to 86.00 after profit taking ran its course in Asia. A move down to 85.65 ran into good bids and more macro buy interest is tipped into 85.50 and 85.20, leaving the downside in check. Japanese policy risk should encourage yen selling pressure on upticks, but into the New Year holiday U.S. fiscal cliff uncertainty is likely to dampen position taking.

[GBP, USD]
Cable is supported ahead of 1.6150 largely due to the correction in EUR-GBP. It pulled back from 0.8220 on Friday and extended just under 0.8160 during today's session. Very low market participation out of London moved GBP higher on Friday and this has been the case today. After Asian central bank intervention went through in local currencies last week there was conjecture that dollar selling against EUR and GBP could go through on dips. Short technical studies are mildly positive, but last week's 1.6200-10 highs still represents a potential near-term top.

[USD, CHF]
USD-CHF is stable close to 0.9150 following last week's move up from the 0.9100 region in thin trade. Movement in USD-CHF mirrored the EUR-USD correction back to 1.3180, though direct flows via USD-CHF were limited, overall. USD-CHF sellers are layered towards 0.9200, which have held since December-16 and are protecting buy stops above. The daily chart has pointed to an extended move under 0.9100, but the lack of follow through last week has left a more neutral picture.

[USD, CAD]
USD-CAD is stable close to 0.9950 in overnight dealings, after rallying last week to 0.9970 on the back of U.S. fiscal cliff concerns. With the Canadian calendar empty, the pairing remained sensitive to risk levels, though with prospects for a solution to the U.S. crisis seen slim at best, USD-CAD upside looks to be a better bet at the moment. Sellers are expected into 0.9980 to the parity level, with stops noted above 1.0000. Buyers should keep the downside in check from 0.9920-30.