The dollar continues to search for direction as the week is coming to an end, and although we saw a lot of weakness in the last few days, it will be crucial to see how the currency behaves in the following week, what with important economic data coming out of US. Markets are trading on positive note since Asian session, as signs that the recession may start to stabilize are making investors more positive on their economic outlook.

The EUR/USD is trading higher still, however the pair needs to break free of 1.3360 in order to say that more upside is to be seen, as long as the pair holds 1.30 for now. Let€™s not forget that next week; the euro has a big challenge on its way, as ECB meets to decide on future of interest rates. Traders are speculating that Trichet and co may cut more by 25 points, however due to the latest split in members opinions, markets are unsure as to how the bank will proceed. For now, the euro is €œtrapped€ within range of 1.31-1.33 and let€™s sees how the pair behaves if the latter level will be reached

The economic calendar has a few important data today out of UK and US, with Manufacturing PMI coming out better than expected, giving the pound a push against all other currencies. The sentiment for the sterling is getting better, after the latest economic numbers are showing signs of recovery, driving the GBP/USD marginally higher towards 1.50. The latter level is very important and if it breaks, we may see further upside towards 1.52. Also we have ISM Manufacturing out of US later on, which is forecasted to give us a better number, and traders may want to monitor the result as the latest data of Manufacturing sector contracted by the most for years.

The risk appetite is making a comeback in the markets and that is mainly due to the fact that traders anticipate better economic numbers from now on, however there is always the feeling that what we witness now is a bear rally which although looks strong and ready, nevertheless it could breakdown in the coming weeks, if more nasty surprises hit the world economy.

Next week we have a busy economic calendar, with ECB and BOE rate decisions and Trichet€™s speech afterwards, which may determine the euro€™s short term future. Also we have nonfarm payrolls and although we all know that the number may be once again more than -600.000 jobs, however there is always the element of surprise which if indeed comes, investors will welcome it with further bids.

With UK economy still in the dumps, ECB monetary policy so mixed, as Trichet and co keep giving us mixed signals about their monetary stance and also President Obama€™s unlimited efforts to bring confidence back in American people, it is crucial to see how the next coming months will play out and if indeed there will be light at the end of the tunnel for traders across the globe. The constant battle between risk appetite and risk aversion is the theme of the markets currently, what with the newest swine flu €œspreading€ all across the media and investors trying to seek comfort and safety in the dollar as it is perceived the safe haven currency for now. So far, risk aversion always prevails and until we see better economic numbers getting released on a more permanent basis, traders will continue to seek safe haven assets...