Another week starts with investors slightly more positive about the economic outlook, thus stocks went up for another day with Asia gaining more than 200 points overnight and Europe slightly down, amid poor earnings reports from European companies. However, New York has opened on positive territory and has every potential to continue its rally for the rest of the day.

The EUR/USD is retracing heavily since yesterday€™s new high at 1.3070. The pair as expected found good resistance levels at 1.3070 and therefore went down more than 100 points this morning. As long as the pair doesn€™t break support of 1.2860, and keeps trading above 1.29 there are many chances that the rally will find more buyers on dips to take another go at 1.3070 and 1.32 eventually. The dollar is trading lower these days, as the new found risk appetite, makes traders not favoring it as a safe haven currency and instead trying their luck with the euro and the pound!

The GBP/USD is trading lower too today, after the pair failed to break 1.4270 yesterday! The pound is weaker than the dollar and that can be easily seen in EUR/GBP. The next level to watch for the par is 1.3930 ahead of 1.3880. If the pair manages to hold those levels for now, then further upside is possible too. Let's not forget that this week we have the minutes of the last BOE monetary meeting and investors will monitor closely the statement for any signals as to what the bank may do next! The risk of further cuts is big, after King himself told reporters that the bank is contemplating dropping rates down to zero, if economic conditions continue to deteriorate! For now, the pair is trading within 1.39-1.42 range and a clear break may show us what's next for the pound! As long as 1.39 stays intact, another upside move is very possible in the coming days!

Checking the economic calendar sees some important economic releases out of Euro zone and UK, with German ZEW coming out slightly better than expected, however not being enough to give euro another push above 1.30. Also we had PPI out of US, which came out worse than expected and Housing data which were mixed and did not provide any reaction from traders. It will be interesting to see how the day progresses towards NY closing and if the recent gains we saw printed can be sustained!

Investors are in need of good news and are not afraid to show it, and the minute we have better than expected earnings reports out of banks or corporations, the sentiment becomes positive and stocks and equities rally as an aftermath! The question now that arises is should we let ourselves €œfall in love€ with the upside? I believe that the recent bullish move we witnessed was a combination of a needed retracement in all markets, after the recent fall and together with positive earnings from banks and the need for a better economic tomorrow, which pushed investors in a more positive mood. The catalyst for all that will be the coming days and if we see more risk appetite and investors free of risk aversion, then the rally can afford to run wild for now.

However, beware of €œfalse prophets€ like Bernanke and his recent interview which basically said that recession may finish before the end of 2009 and the worse may be behind us. It is not a matter of being optimistic or pessimistic about the economy, it€™s only a matter of being realistic and if we take all the economic data in mind, together with recent statistics, we can see that the worse is not yet over and the next months will be crucial for US economic reconstruction€¦