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Dukascopy Market Review, US Session, 23rd September

Previous session overview
The dollar stabilized Wednesday in early New York trading, after falling overnight to a fresh 12-month low against the euro and 13-month lows versus the New Zealand and Australian dollars.

But after the rally for riskier currencies in Asian trading, caution has re-entered the market as traders look toward Wednesday afternoon's announcement on U.S. interest rates by the Federal Open Market Committee, which is expected at about 2.15 p.m. EDT.

The dollar has stabilized in European and early North American trading, returning below USD1.48 from its 12-month peak against the euro at USD1.4843.

The British pound rose 0.4% against the greenback to USD1.6428 after minutes from the Bank of England showed that the monetary policy committee voted 9-0 to leave the size of its 175 billion pound asset-purchase program unchanged and to make no changes in official interest rates at their September meeting.
The dollar bought 91.36 Japanese yen from 91.13 yen on Tuesday.

The Canadian dollar is marginally lower Wednesday morning, reflecting a more stable tone in the U.S. dollar in general and the cautious mood ahead of the results of the U.S. Federal Reserve's open market committee meeting later in the session. The U.S. dollar was trading at CAD1.0697 from CAD1.0688 late Tuesday.

Market expectation
The policy-setting FOMC is not expected to raise Fed benchmark rates, but attention will focus on the statement accompanying the decision for any hints of an end to the central bank's ultra-accommodative stance. Depending on the wording of the statement and how it is interpreted by investors, the dollar sell off could resume during the New York afternoon, said analysts.

Most likely, analysts said, is that everything will remain the same, which would lead the euro to continue its tear against the dollar after the brief pause over the past few sessions as traders have taken profits and sat on the sidelines until the Fed's decision.

Market speculation ahead of the Sept. 9-10 meeting had risen over the possibility the bank could cut the rate paid on reserves held by commercial banks with the BOE in an effort to force the banks to move the reserves into the broader economy.

EURUSD presses under USD1.4770 area now for trade just under USD1.4760 as earlier mentioned stops are hunted, though momentum thus far suggesting little damage there. Stops said to extend to USD1.4755 or so, more sub USD1.4730.

EURJPY offers at and above JPY135.00 so far sufficient to contain the bounce back from earlier Asian lows close to JPY134.10. A clean break above would expose trend line resistance highlighted by Technical analysts at JPY135.23, ahead of Monday's highs just shy of JPY135.50. Tuesday's close above the Ichimoku Cloud seen as a positive signal, the top of which today seen as pivotal at JPY134.84.