Price remains below 13991 (stay bearish below there…targeting 13650-13750) but the break above the ii-iv line suggests that a larger correction is underway. The area of the former 4th wave begins at 14028 and extends to 14200. I’ll be looking for evidence of a top in this zone. The 38.2% of the decline from 14583 is at 14131 (which is also a former support zone).

The move to deflate risk premiums across the markets has stalled. For the euro, this means its role as the primary counterpart to the US dollar and the fundamental concerns surrounding the health of Greece and other Euro Zone members have been temporarily put on hold. However, until investor sentiment turns all the markets back on the path to yield demand; the larger bias is still in place. Therefore, I am waiting for the market to establish the next phase of yield demand. Will there be a specific indicator or event to instigate such a move? Probably not. I think that as was the case three weeks ago when the markets started to roll over, the cummulative pressure on sentiment will likely put the market on pace on its own.

In the meantime, I will hold with the euro crosses that have been on my books for some time. My EURUSD short is starting to retrace; but with an entry just below 1.42, I can afford to be patient for a much larger trend to develop. Along similar lines, the EURGBP short position established with last week’s bounce to 0.88 is much closer to breakeven. This isn’t too concerning to me yet as I think the fundamental case for this pair to continue its tumble is far better than the euro’s decline against the US dollar (which is fully dependent on underlying sentiment trends). And, though it is important to maintain risk exposure, I am still interested in the congestion pattern on EURJPY just below the former, eight-month range low at 127. Fundamentally, this is very similar to my EURUSD position (both the dollar and yen are funding currencies). Though technically, this cross’ patten looks a lot like a EURGBP setup that saw a more reserved follow through. For a position, I have set out for a short at 126.65 and placed a stop 100 points higher. With such a wide but necessary backstop (not to mention the short euro exposure I already have), I will reduce position size significantly. My first target will be 125.15 and the second will be left open for now.

I initially sold EURUSD at 1.4881. Prices have now taken out my second revised target at 1.4044 and I will look for a move down to 1.3740 from here, a level that has acted as both significant support and resistance since October 2008. A near-term upswing may materialize from here to re-test 1.4028 after prices put in a Piercing candlestick formation, but I see this as corrective and I plan to hold the pair though any shallow retracement as the bears regain momentum. As before, a stop-loss will be activated on a daily close above 1.4540.

Remaining short the EUR/USD has proved profitable as the pair reached as low as 1.3852. Although there is still bearish potential to 1.3483-61.8% Fibo of 1.2444-1.5149 current bullish sentiment at a level where we see former congestion, justifies taking profits at this time. I will leave open a smaller position and wait for a break below 1.3802-50.0% Fibo before adding any fresh positions. The ECB rate decision is approaching and considering the level of event risk it is prudent to wait for the post decision remarks to judge the potential for future tightening. Euro-zone producer prices rose 0.1% in December but not nearly enough to push policy makers off their “risks remain balances” statements. Therefore, the same old company line could see Euro support wane and increase downside risks.

Keeping up with the EUR/GBP short recommendation from the previous day, the yesterday’s rally stalled at a high of 0.8771, which fell short of my entry at 0.8798, and I took off the trade following the New York close. As the pair fails to retrace the decline from January, we may see the pair continue to trend lower over the remainder of the week, but we are likely to see the pair face increased volatility on Thursday as the Bank of England and the European Central Bank are scheduled to announce their rate decision at 12:00 GMT and 12:45 GMT, respectively. Both banks are widely expected to maintain their current policy this month as they aim to encourage a sustainable recovery however, commentary following the rate decision is likely to move the markets as investors weigh the outlook for future policy. At the same time, market participants speculate the BoE to conclude its easing cycle this month as the U.K. economy returns to growth, and a rise in interest rate expectations is likely to benefit the British Pound as the MPC aims to balance the risks for growth and inflation. As a result, I will stay out of the pair for the time being, but may look to short the pair as comments from the BoE and ECB cross through the wires later this week.