Brown Brothers Harriman - "In the first part of next week, ahead of the FOMC meeting, we expect a generally firmer dollar. It seems to be a much more forgivable to be long dollars ahead of the decision that has been awaited for a third of the year than to be short dollars. That said, we suspect the dollar may weaken after the FOMC decision. The Fed is more likely to do less rather than more relative to market expectations.
That sell-off can extend into the end of the week. However, we look for the dollar to begin recovering ahead of the German elections next weekend. While a grand coalition seems to be the most likely scenario, there may be some pressure to reduce long euros ahead of the vote.
Ahead then of the FOMC meeting, we see initial support for the euro in near $1.3240. If our general scenario holds, the euro can take out the $1.3325 recent ceiling after the FOMC meeting. Sterling is outperforming and is at the best levels against both the dollar and the euro since the Jan-Feb. Ironically, sterling's strength in part reflect the lack of confidence in the BOE's forward guidance. The market is pricing in rate hike a year before the BOE guidance would have it. Provided the $1.5750 area hold, sterling will likely push toward $1.60.
The dollar does look set to concede ground to the yen. The greenback's technical tone has deteriorated since reversing lower at midweek after recording a two-month high near JPY100.60. Initial support will likely be found in the JPY98.80-JPY99.00 area. A break of JPY98.20 is needed to be significant."