Major dollar pairings have been holding tight ranges, and while equity markets in Asia have followed yesterday's gains on Wall Street and in Europe, volumes have been low with investors hunkered down ahead of what will be a finely balanced decision by the Fed tomorrow. A survey of 30 economists yesterday by the FT found 14 expecting the Fed to pull the rate-hike trigger. We also expect a 25 bp hike, but anticipate that this will be accompanied with a dovish statement and dot plot. The expectation of such mollifying guidance in the event of a tightening is likely keeping stock markets underpinned. Assuming this works, this would be dollar positive. We also think that a no-change would be dollar positive, at least after an initial sell-off, perhaps, as the currency's yield advantage against major peers will remain intact as tightening expectations would simply flip to later in the year. The worse-case scenario for the dollar would be that a Fed hikes rates and markets crash, which would favour the yen and euro, the latter of which has recently proven to be a haven currency during bouts of risk aversion.

[EUR, USD]
EUR-USD settled back below 1.1300 after U.S. short-end yields spiked to a four-and-a-half year high on Tuesday, but impetus for follow-through buying has not surprisingly proved limited into what will be a finely balanced decision by the Fed tomorrow. EUR-USD remains some 2% up on early September lows, since when the pair has broken above its 200-day moving average, presently at 1.1229. Support comes in at 1.1229 (the 200-day moving average), and resistance is at 1.1328-30 and 1.1373-80.

[USD, JPY]
USD-JPY has managed to re-establish itself about 120.00 as global stocks manage gains, albeit in low volumes, into the Fed's decision on Thursday. Market analysts are evenly divided on tightening prospects, but even in the even of a rate hike, which we also expect, the Fed is likely to mollify market concerns will a dovish guidance. We therefore take a cautious bullish view of USD-JPY, thought the risk is we see further China stock market volatility regardless, a circumstance that would support the yen via its status as a haven.

[GBP, USD]
Sterling has been underperforming this week, having lost about 0.7% to the dollar from the day's high. The pound has also lost ground to the euro. Although the latest Bloomberg survey found a median expectation for the BoE to pull the rate lift-off trigger in Q1 next year, and BoE MPC members Weale and Forbes sounded out some hawkish remarks in recent days, yesterday's August inflation report showed headline CPI dipping to 0% y/y and core CPI ebbing to 1.0% from 1.2%, while PPI data undershot expectations. Cable's low is 1.5330. The 200-day moving average is at 1.5348. Today brings UK labour market data, where wage data will be of particular interest as this is a key metric the BoE is closely watching.

[USD, CHF]
EUR-CHF has settled back under 1.1000 after last week trading above here the first time since the SNB abandoned its former cap on the franc in January. General euro gains and a steadier tone in global stock markets has been conducive of franc declines. Swiss policymakers have also been successful in undermining the Swiss currency's status as a safe haven, with deeply negative deposit rates having caused a steady drip feed of yield-searching Swiss fund outflows.

[USD, CAD]
USD-CAD remains in a consolidation pattern centred around 1.32-1.33 in the wake of logging a 12-year peak at 1.3353 on Aug-25. The pair has been whipsawed by swings in oil prices in recent sessions, which the Canadian dollar correlates positively to. USD-CAD support is at 1.3200 and 1.3100-16.