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Previous session overview The U.S. dollar bounced back timidly against the euro and the yen in Asia Monday, in a technical correction after sustained losses in recent days, but should remain in tight ranges ahead of key events later this week. With many large Asian markets closed for holidays, including Japan, Singapore and India, the dollar was well-supported in low-volume trade, as foreign exchange players await a statement from the U.S. Federal Reserve due Wednesday. The Fed, which starts a two-day meeting Tuesday, isn’t expected to change its monetary policy, but any indication of a shift towards an early increase in policy rates would be positive for the greenback, which has been hurt by low expectations for U.S. interest rates. The euro’s recent rally against the dollar stalled, but strengthened against the pound. The Euro zone’s current account balance came in at a 6.6 billion euro’s surplus, and German producer prices increased by 0.5% month over month in August. The U.K. pound was under pressure on reports Friday that the U.K.’s top financial regulator determined Lloyds Banking Group PLC most likely would be unable to raise enough capital to exit from the U.K. government asset-insurance plan. Some analysts said this suggested the Bank of England wouldn’t be exiting accommodative monetary policy any time soon. The pound fell to a two-week low of USD1.6231 in New York. The Australian dollar drifted lower in quiet trade on Monday as dealers looked to this week’s U.S. Federal Reserve policy meeting for fresh impetus. The Federal Open Market Committee is not expected to move interest rates at its two day meeting on Tuesday and Wednesday but analysts will be looking for the latest prognosis for the economy and any plans to exit emergency stimulus measures. Market expectation The euro is lower against the dollar Monday, but the U.K. pound is facing some potential selling pressure against the dollar and yen. EURUSD reported stops through USD1.4650 were triggered to take rate down to extended lows of USD1.4636 before profit take demand emerged to correct it back to USD1.4660 (USD1.4663 38.2% USD1.4706/1.4636). Offers now seen placed to USD1.4665, a break to open a move toward USD1.4680 (USD1.4679 61.85). Support noted at USD1.4636, more between USD1.4625/20 ahead of USD1.4605/00. USDJPY extending the highs in early European dealing, attempting to establish a foothold on a JPY92 handle as euro-yen remains buoyed just off best levels. Offers now eyed into JPY92.20/25, while Technical analysts see the 21-day moving average as resistance at JPY92.44, the rate having traded below the 21-day for the past five-weeks. European stocks are expected to open flat Monday, after a mixed session in Asia and with little fundamental data to provide direction. Analysts said they expect the Australian dollar to hold firm as the U.S. dollar broadly weakens, with key support at USD0.8560, and resistance at USD0.8770 and then USD0.8960. The G20 nations meet this week, though they are unlikely to discuss currencies. Still, currency traders want to be in a good position to either take further safety in the dollar, or pounce on a strengthening euro, depending on what happens at the meetings, analysts said. Source: Dukascopy