http://usdwatch.blogspot.com/2008/08/us-currency-outlook-forex-currency.html

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We have been noting the shaky state of the USD in recent weeks, even as it had been recovering. Underlying weakness in the currency in the short run has been coming from the uneven state of the U.S. economy. Support has also come from the recent tumble in oil prices. Technical traders in oil have been keeping close watch on the $122.50 level as support. A decisive move below $120 would give the U.S. unit a lift.

Markets feel that falling energy prices could take the pressure off key central banks, especially the ECB, to pursue a restrictive monetary policy. A less restrictive ECB could provide the USD with room to improve vs. the EUR. Recent economic data from the Eurozone suggest that the EZ economy has started to slow dramatically. As for market dynamics, dealers seem to be on the fence for EUR/USD in the short run, but lean in the direction of a higher USD in a longer term time perspective.

For now, the lead EUR/USD looks to be mired in a trading range. At present levels, the EUR/USD is now back approaching EUR/USD 1.5500 market neutrality level.