The British Pound fell against the Dollar amid reports that showed the U.K.'s M4 money supply unexpectedly dropped in August and mortgage lending continued to slow in July. Traders were also paring positions ahead of the release of the Bank of England minutes on September 22^.

Technically, look for the GBP USD to continue to weaken into a short-term retracement zone at 1.5512 to 1.5461. An uptrending Gann angle inside this zone could provide additional support. Watch for the market to settle into this zone or encourage profit-taking following the break.

The USD JPY lost a little ground as traders pared long positions ahead of the FOMC meeting. Trading has been in a tight range since last Wednesday’s intervention. Fear that the Fed may decide on additional quantitative easing weakened the Dollar versus the Yen.

Technically, the Dollar/Yen is having trouble breaking through a pair of tops at 85.90 and 85.91. Once this area is cleared, the charts indicate there is room to the upside. The best case scenario has this market eventually rallying to a major 50% price level at 88.93, but this is not likely to occur unless Japanese officials intervene once again. On the downside, a test of a retracement zone at 84.40 to 84.04 is likely to attract fresh buying.

The U.S. Dollar traded slightly lower versus the Euro as traders factored in the possibility of more monetary policy easing by the Federal Reserve at tomorrow’s Federal Open Market Committee Meeting.

The FOMC is not expected to take action on interest rates, but may announce another round of bond purchases, known as quantitative easing. This action is supposed to act as stimulus to help revive the ailing U.S. economy.

Since the summer, a series of economic reports have indicated that the U.S. economy is stalling. Although a double-dip recession is now a remote possibility, based on recent Fed language, the central bank feels that the economy has slowed down enough to warrant further quantitative easing.

On Monday the Euro held on to its slight gains despite more rumors of sovereign debt problems in Ireland and Portugal. One analyst described the situation as “ugly” particularly in the Irish and Portuguese bond markets.

Technically, the EUR USD had an inside day following Friday’s closing price reversal top. Overnight, bullish traders defended last Friday’s low at 1.3019, thereby preventing the confirmation of the reversal pattern. A confirmation of this pattern could trigger the start of a break to 1.2901. A trade through 1.3159 will negate the pattern and should trigger an acceleration to the upside. Throughout the day, the Fibonacci level at 1.3049 provided support.