Yesterday's important FOMC meeting came and gone with not so many new elements from the bank as the rates were left unchanged as widely expected and Bernanke not giving the market participants many clues as to what's next. The bank said that economic conditions have improved according to latest data and recession maybe starting to ease slowly. The bank didn€™t reveal any new plans as to how it will handle inflation in the future, however they indicated that there is not a lot of worry about deflation which could mean that at some point they are ready to hike interest rates.

The EUR/USD was trading heavily on the upside just before the FOMC meeting; however the move was reversed after the meeting, as investors bought the dollar on the absence of any earth shattering news. The pair found resistance above 1.41 at 1.4130 and the move is yet to be seen if it was strong enough for euro bulls to take out that latter level. As long as the pair trades above 1.3870, we may see continuation of the move in the coming hours.

The economic news yesterday helped with the initial risk appetite, as durable goods orders came out higher than expected, giving traders the confidence that the recovery may be here.

The calendar today has a few releases worth watching, with GDP out of US which is expected higher for the quarter and also jobless claims out which will be monitored closely for any signs of easing in the employment sector. Also Bernanke is testifying before the Senate regarding the acquisition of Meryl Lynch to Bank of America and it will be vital to see what the rhetoric is and how much he will get €œgrilled€ by the representatives. We don€™t expect something new on his testimony; however markets are always vigilant about comments on the recovery and hints on rate outlook.

With a new air of confidence across the global markets, it is maybe advisable not to get carried away about the so called recovery, and wait until next week's payroll data which could either make or break the current euphoria. The latest employment data suggested that fewer jobs were lost, however the unemployment rate reached new highs and in order to see a substantial improvement, we need to keep seeing fewer jobs each time. The reality is that US is still in recession together with the rest of the world and it will take more than a few €œgreen shoots€ in the economy before we can start talking about stabilization.

One of the mistakes of market participants in the past, was underestimating the crisis and the level of damage of the sub prime mortgage, and when the first signs of market collapse came, investors were caught over exposed, hence the liquidity we witnessed last fall. The way to go for now is to be realistic and wait until clear signs of economic recovery. The politicians and bank officials are making a good job of trying to convince everyone that the worse is over, however beware of the false prophets, as anytime risk aversion could kick back in and another slide in stocks and equities could happen when traders realize that things are not as rosy as Bernanke and his pals are presenting them.

For now, lets watch EUR/USD and how it will behave at 1.39 ahead of 1.3870, as it needs to keep the level before any further upside is to be seen and also how GBP/USD will behave at current levels. The pound is weaker than the euro today, as EUR/GBP is making a recover towards 0.86. The estimations from OECD that the UK economy is shrinking faster than expected, is giving investors jitters for now and the uncertainty over the economic recovery is what keeps the pound from further upside. The 1.60 level is important for now and the pair needs to trade above it if further upside is to be seen in the coming days€¦