Bigger picture, I remain bullish against 9160 (moving risk from 9100) in anticipation of a move above 9480. (9700 is an objective from a longer term Fibonacci extension). Near term support is 9270 and 9235. The decline from 9480 is probably a b wave (within a y wave) and b waves are often choppy, messy affairs. As such, do not be surprised if we see consolidation over the next several weeks.

There has been a notable correction in some of the more dramatic moves over the past 24 hours; but there has been little more progress made on big fundamental issues or on particular currencies. This leaves me with little in active positioning but with many ’potential’ setups. As for the yen focus that we usually maintain on Wednesday’s, there is the potential for some elastic reversal activity on CADJPY and AUDJPY; but that would entail fighting a trend that has been revitalized by volatility - a dangerous prospect. However, there is some potential to be found in the crosses with the european currencies. EURJPY is trending higher within a channel; and there could be a setup with a dip back to relative support back at 123.15/45. Better tuned for a breakout rather than tame trend play is the 145 range high on GBPJPY. These two may take time to develop and fundamentals may undermine their appeal well before we come to activation.

In the meantime, there are some other pairs that I am currently more interest in. My only active position at the moment is a short EURGBP setup taken after the break of a 16-month asymetrical wedge formation. The bottom node of this formation can be drawn from the swing lows of 6/22/09 to 8/06/09 to 2/18/10. However, technical analysis is just as much an art; and the trendline can potentially be redrawn such that today’s low still fits within the boundaries of the congestion pattern (with a loose follow support around 0.8675). With this in mind, along with the fundamental anchor that is next month’s UK election, I have only taken a small position and am looking for the aformentioned support to give way before I dive in for an extended move. Other interesting pairs included the Canadian dollar’s undervalued interest rate potential in AUDCAD and a potentially overspent premium build in USDCAD. Elsewhere, EURNZD looks like a mature trend that could truely find fundamental support in continuation while USDCHF has the technical setup (long-term wedge) that could be pressured by SNB intervention. Many pairs to watch while we await direction on the bigger themes.

USDJPY has rebounded from resistance-turned-support at 91.80 to re-test the January 2010 swing top at 93.42. A break beyond this boundary will go a long way towards confirming the bulls are back in control, while anything shy of that leaves the door open for further corrective downside. I will remain on the sidelines for now looking for confirmation to yield a compelling buying opportunity.

Last week I jumped the gun on a long EUR/USD trade as I was seeing broader optimism continue. However, I failed to account for the pair’s diminishing correlation with risk appetite due to the issues in Greece. Indeed, Greece could activate a 45 billion- euro ($60 billion) emergency aid package led by the European Union before talks on the conditions for the loans conclude in two weeks time, Finance Minister George Papaconstantinou said. The single currency has come back under pressure as concerns build that the current aid package as constructed wouldn’t be enough to cure all of the indebted country’s ills. Additionally, the fact that a European nation may need to go to the IMF for help is generating broader concerns for the region. The pair has settled into a range and is looking to test the lower bound near 1.3300 which could justify a short at these levels. I would take a small position at this time as the current bearish rally could be exhausted, but become more aggressive with a break below the psychological level. Also, I will watch to see if the range holds for a long position as traders may be content to remain range bound until we see Greece actually trigger the aid package.

Following up with the EUR/GBP trade from earlier this week, the pair extended the two-day decline and slipped to a fresh monthly low of 0.8683 on the back of euro weakness, which well exceeded my target at 0.8705. As the euro-pounds maintains the downward trend from the 3/15 high (0.9129), the pair looks poised to test the yearly low at 0.8601, but we may see a corrective retracement follow in the days ahead as the daily RSI approaches oversold territory. As a result, I stay flat for the time being and will wait for additional confirmation before looking  to take on another trade.

Our overall outlook for the pair remains highly constructive and as such, any dips below parity should be used as formidable buy opportunities. At this point however, we can not rule out the potential for a short lived dip to test 0.9900. But any additional declines should ultimately be well supported by 0.9900 which represents the 78.6 fib retracement off of the major 2007-2009 move. Longer-term cyclical studies continue to warn of some major upside ahead, but initially, at a minimum, a break back above 1.0300 will be needed to reaffirm and accelerate gains. STRATEGY: BUY @0.9905 FOR AN OPEN OBJECTIVE; STOP 0.9790. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY.