Weekly Outlook for Major Currencies

NEW YORK (TheStreet) -- Euro/Dollar The pair lost 30 price interest points (pips) in trading over the past week. The market heads into September following a very slow August that was characterized by range bound trading. During the entire month of August, the euro gained only 1.30% (two day's ATR), having one of the weakest trading periods of the last few months.

On the weekly chart, the euro (at $1.4355) is trading between the 50% and the 61.8% Fibonacci retracement of the strong downtrend seen during the second part of 2008 (August through October). Moreover, the euro is now struggling to break above the $1.4350 area, the same point that held the pair during the last few months of 2007 when it gathered enough momentum to push the price action up to the $1.6000 area. A break above the $1.4350 level would also have important implications this time, signaling the euro's bullish outlook, and overall dollar weakness. Traders will be looking for the 90% correlation in S&P 500 futures/dollar to hold this week.

Pound/Dollar The pound (at $1.6330) was the worst-performing currency of the past week, losing approximately 1%. On the weekly chart, the pound is trading in the middle of the huge channel developed during the prior three months of trading. The selling may be limited on Monday as the commercial U.K. market is on a bank holiday.

Earlier this week, the pound managed to break below a support trend-line that has been holding the pair since June 08, but the move was eventually retraced. The pound's outlook over the coming period still remains bleak, meaning that the other major currencies are likely to outperform it. That will be at least until the U.K. economy shows signs of expansion and the Bank of England announces how it's going to exit from its quantitative easing policy.