The impasse on the U.S. fiscal cliff and eurozone uncertainty fueled a risk averse tone. The dollar is holding firm, though on the daily chart it is still close to recent lows when compared with mid-November levels. JPY consolidated at softer levels after Wednesday's N.Y market keyed off the latest Japan election polls, which sets up LDP leader Abe for a potential outright majority. The focus in Europe is on policy meetings from the BoE and ECB, though unchanged policy is widely expected. The ECB will be of interest as it releases a new set of forecasts for growth. Draghi should also leave the door open for further measures. The U.S. calendar brings just weekly jobless claims, though with the official employment report due Friday, trade is likely to slow early.

[EUR, USD]
EUR-USD marked time close to 1.3050, leaving it little changed from Wednesday's N.Y. trading levels. The move off 1.3125 yesterday fueled selling pressure on upticks and interest from 1.3075 in early Asia forced a move to 1.3045 lows. However, buyers were noted on dips and EUR-JPY's firm tone also put a temporary floor in place. EUR longs are still in control at current levels, but a move towards 1.3000 would change the near-term picture. Sell stops are noted through 1.3020 and expected to increase in size under 1.3000. Offers look likely now towards 1.3080 and 1.3100, while big offers remain a factor from 1.3130 ahead of 1.3150 barriers.

[USD, JPY]
USD-JPY and the JPY crosses consolidated yesterday's gains, but upward momentum was limited to a degree. Increasing expectations of a LDP election victory kept yen shorts in control, but excessive positioning is still a restrictive factor. USD-JPY added to yesterday's gains to trade at 82.62 highs, but could not clear exporter offers and there are also residual flows related to outstanding options that are noted from 82.90-00. Buyers are noted from the 82.10-20 area, with offshore names tipped, while heavy Japanese interest is noted under 82.00. EUR-JPY is in good shape ahead of 107.50 , but large option structures from 108.00 caps gains, along with EUR heaviness elsewhere.

[GBP, USD]
GBP is little changed despite yesterday's poor U.K. services PMI reading and the government's mid-year fiscal statement. Cable is idling just under 1.6100, where good size option strikes are rolling off for the third consecutive session. Adding to support is M&A flows, along with standing bids into 1.6070-80 and ahead of 1.6050. Movement over 1.6100 should meet hedging activity around 1.6125-30 ahead of mooted 1.6150 barriers. After yesterday's budget statement most market participants see increased risk of a rating downgrade next yeasr, but it may have more of an impact on the government politics rather than sterling, which continues to benefit from foreign investment inflows.

[USD, CHF]
EUR-CHF has reversed course after it hit 1.2168 highs on Wednesday. Short terms accounts got caught long after speculation did the rounds that the Swiss authorities could put capital control measures in place. However, this seems unlikely. We think the SNB is more likely to maintain policy status quo and the recent decision by Swiss banks to charge on CHF deposits has reduced the need for SNB to act. Price action justifies this thinking and EUR-CHF corrected back towards 1.2100. USD-CHF is also range bound. Buyers see good risk reward into 0.9250, but offers have capped for the last few sessions into 0.9300-10.

[USD, CAD]
USD-CAD in now in the ninth consecutive session trading just above the 0.9900 level, while over the same time frame, the highs have generally be around the 0.9950 area. Not much to go on, though should equities be able to add to their gains, we may see some more interest in taking out stops under the figure. Dealers report bids from 0.9910, though it remains to be seen if the market has enough ammo to grind through the buyers to expose the stops under the figure. A clean break of this level would open up early November lows around 0.9875.