The euro has been trading higher against the dollar since the beginning of the week, however the rally found a temporary stop above 1.34 as traders took their profits before tomorrow's ECB rate decision. Now we must wait and see what happens, however the word is another rate cut of 25 points will be made by Mr. Trichet, however market participants are waiting for his statement before they commit to further gains for the single currency.

The EUR/USD has found support at 1.3260 for now, and as long as this level holds, we may see another round of gains towards 1.34 in the coming hours. The pair is poised for further gains, with risk appetite returning to the markets and the dollar weakening as a result. In order to say that further upside is coming, we need to see a clear break of 1.3380 ahead of 1.3430. The next level to watch is 1.3260€¦

The economic calendar had a few important releases today, with better than expected UK PMI numbers and also retail sales out of the Euro zone. The ADP report showed a better than expected number of -491.000 against a predicted -644.000, giving traders some renewed hope Friday's payroll number will be slightly more optimistic and that the economic recovery may be nearer that initially thought. Markets seem to love every bit of good news and that is how things should be for longer periods of time, in order to be able to justify market rallies.

Yesterday we had Bernanke€™s speech in front of the Senate which gave markets some hope that the recession may be easing and by the end of 2009 we may see stabilization. However he warned that another shock in the credit sector may prolong any economic recovery. It is clear that risk aversion will always be a threat to this and traders are now looking for the bottom in stocks in order to build up their longs.

The gold has risen since early in the London session, and although we saw losses towards $890 yesterday, as long as this holds for now we may see further gains, due to traders need for commodities. As long as the euro is rising, the gold will rise too and the correlation between them is once again visible.

Market activity today is thin, with traders waiting for tomorrow's ECB and BOE rate decisions. The Bank of England is likely to hold its interest rates coupled with better than expected economic numbers, makes the pound currently more lucrative. The GBP/USD is holding 1.50 as a support and it will be interesting to see what happens after tomorrow€™s decision. The ECB is expected to cut further weight on EUR/GBP and the pair looks good for further loses towards 0.8760

Let€™s see how the currencies behave after tomorrow's important events and if the euro will be able to hold to its gains after Trichet€™s speech. Don€™t forget last month we saw the euro gaining across the board before the ECB announcement, then reversing immediately afterwards; proof of 'buy the rumor, sell the fact' tactics. This time it€™s simple: if Trichet signals cuts below 1%, the euro will decline immediately. If he indicates that rates don€™t need to be under this, the euro will have the green light from Trichet to keep rising€¦