USD rallied, ironically, amid new safe haven demand as fresh U.S. fiscal cliff-hanger concerns were sparked as U.S. House Republicans cancelled yesterday's "Plan B" vote on the Budget. U.S. equity index futures went limit down in their overnight session in reaction to the news, while EUR-USD dropped to a three-day low of 1.3179 from 1.3225 before steadying in seasonally quiet trade around the 1.3200 level. GBP-USD saw a similar price action in pulling back to the mid-1.64s, and the same patter was seen in other U.S. dollar pairings. The JPY was the outperformer, despite BoJ signals that the it might adopt an inflation target in the near future. The Japanese currency has perhaps been due for a correction after quiet a big bear run over the last two months. USD-JPY dropped below 84.00 while EUR-JPY logged a three-day low to 110.29. The AUD and NZD were, not surprisingly, among currency underperformers. AUD-USD dove to a 16-day low of 1.0435.

[EUR, USD]
EUR-USD dipped to a three-day low of 1.3179 during the Asia session. The 1.3175-80 is a technical support zone, comprising a minor trend support line and the previous trend peak that was made on Dec-14. Sell stops are reported under 1.3170, though order books are pretty thin and books fairly square into the Christmas and New Year period. The main focus into the new year will be on the fiscal debate in the U.S., though there is a final flurry of U.S. data still to come.

[USD, JPY]
The JPY was the outperformer, despite BoJ signals that the it might adopt an inflation target in the near future. The Japanese currency has perhaps been due for a correction after quite a big bear run over the last two months. USD-JPY dropped below 84.00 while EUR-JPY logged a three-day low to 110.29. Yen bears have placed USD-JPY orders from 83.90 to 83.60, but movement on the topside now should meet good sell-interest from 84.40, where Japanese banks are holding good orders.

[GBP, USD]
Cable is stable around 1.6250 ahead of U.K., where final Q3 GDP, Q3 current account data and the latest monthly government borrowing data. The data should complete the run of data out of the U.K. this week that reaffirms the U.K. economic picture of sticky inflation, anaemic GDP performance and a government falling behind its fiscal targets. GBP, a former leader in the currency race to the bottom, has been perky of late, but we don't expect this to last amid the risk of a sovereign downgrade and possible extra boost of BoE QE on the cards for 2013. On an intra-day basis we expect offers from 1.6280 to 1.6310 to cap, while support is noted from 1.6220 to 1.6200. Stops under noted though this levels, but there are better bids from 1.6180.

[USD, CHF]
USD-CHF edged back over 0.9150 overnight as the move to dollar safety dollar fueled buyers from 0.9110-20. Furthers gains are limited by offers from 0.9170 and there are larger orders at 0.9200 that were added on the way down in the recent bout of dollar selling pressure. The technical back does still point to a test of early May lows around 0.9050 and then the 0.9000 area from late April. However, 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 broke up through 0.9900 as a risk-off tone reinforced the recent rebound. The move in Asia came on low volumes and early European names carried it towards 0.9910. There are light natural orders from 0.9915-20 and better sell-interest at 0.9930, which could attract if equity markets add to overnight losses. On the downside buyers are still camped around the 0.9850 region and towards 0.9830, which are protecting sell stops below.