Just under one hour until the Fed announces their likely decision to leave the overnight lending rates at 5.25%.  As with the previous meeting, any market volatility will come from the accompanying statement, which is also expected to be unchanged. The dollar bounce has been swift and directional indicating shorts are covering old positions, as opposed to new dollar longs entering the market. Both EUR/USD and USD/JPY are showing nice support zones to establish short-dollar positions.

First is EUR/USD. We have a .618 retracement and a 1.618 projection pointing to support in the 1.3180 zone. Should the Fed sound even slightly hawkish, I believe the initial EUR/USD reaction lower could offer a high probability entry. I will have orders on the book to buy EUR/USD at 1.3180 with stops slightly below 1.3150.

USD/JPY is showing a similar resistance zone to lean against should the Fed make comments such as â�,��"continued vigilance on inflation, pricing pressureâ�,�, etc. I actually like this Fib resistance zone 117.70-117.85 and daily R2 a bit more than the EUR/USD zone, but with EUR/JPY breaking to new highs, its better to be long EUR/USD than short USD/JPY when playing the dollar lower. Targets will remain open and I will update after the release.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.