I continue to look like the GBPUSD to the downside. A 4th wave correction may be complete in the GBPUSD just above 15500. The rally from 14780 consists of two 3 leg advances, which is termed a double 3 complex correction. After dropping below a short term support line, the pair has rallied sharply in what may be a small 2nd wave. Favor the downside against 15530.

The fundamental gears are turning and the markets have trembled. However, this surge has yet to definitively shift the bearing on investor sentiment; and subsequently, we have not moved to the stage of critical breakouts and prominent reversals. This morning’s primary source of concern is the Greek ’situation’ taking another step towards a label of ’crisis.’ After crunching the numbers, Eurostat announced Greece’s deficits were much larger than initially reported (13.6 percent of GDP), sending the nation’s financing costs soaring and leading Moody’s to cut the nation’s sovereign credit rating. I have been of the mind that there is no viable solution to this problem short of default or limitless loans; but the market needs to be on the same page for this inevitability to have its effect on the the euro and the rest of the financial markets. Furthermore, this is only the tip of a growing wave of fiscal, economic and monetary concern overwhelming the speculative markets. With thin credit availability, burgeoning sovereign debt, financail reform and overextended capitla markets, we are looking at a dangerous times. On the other hand, I have not forgotten the lesson I learned over my vacation: keep your fundamental convictions, but don’t fight the current. Waiting for confirmation of a reversal before loading up on risk aversion positions.

Though, despite my caution, I still have a few active positions as of this morning. My tentative EURGBP short has crossed my alternative rising trendline to help confirm the dissolution of the 18-month wedge formation. Yet, it is important to recognize that the upcoming UK election will have a dampening effect on nascent trends; and so I will have to remain flexible with this position. Two new positions for me since yesterday are long holdings on USDCAD and USDCHF. The loonie setup does fight the the fundamental lean on interest rate expectations (which were further skewed by a Canadian monetary policy report this morning); but this does align itself to conditions where the market stalls and reverses. I suspect we could at least stall at 0.9950 support (my entry) as historical precedence for futher gains is somewhat choppy. As for USDCHF, this is a reduced size position founded on the break of a long-term falling trendline from the swing high at 11/21/08. To truely find follow through, we would need a complimentary (in reality it would be an enabling) bearish breakout from EURUSD. In fact, I would probably take on a EURUSD short if/when that happens.

GBPUSD has put in an Evening Star bearish reversal candlestick pattern below resistance at 1.55, with prices sinking to resistance-turned-support at 1.5323. I will look for confirmation on a daily close below this level to enter short.

I remain on the sidelines regarding the Pound crosses as the uncertainty of the upcoming elections has prevented any trends from developing. The GBP/USD breaking above its prior range has eliminated range-bound strategies. The country’s deficit has reached the highest levels since WII which has cast a shadow over the sterling, despite improvement in the labor market and consumer consumption. Recent BoE minutes revealed that the central bank remains unanimous in leaving open the door for additional QE which is also a negative for the pound. The one trade I see for the GBP/USD is a short below the 20-Day SMA at 1.5282. The technical level has held as support which could be interpreted as a bullish sign, which increases my confidence that a move below would lead to extended losses.

Keeping up with the EUR/CAD trade from the previous week, the exchange rate pulled back from the weekly high (1.3729) and slipped to fresh yearly low of 1.3316 during the previous day, which well exceeded my target at 1.3359. However, as the overnight decline stalls at a low of 1.3327, with the daily RSI continue to approach oversold territory, we may see a corrective retracement in the days ahead, and I may look to short the pair again on another leg lower.

Not looking to force any trades here, but the cross has been under some intense pressure of late and now eyes a retest of next key support by 0.8600, which represents the 2010 low from January. However, any additional declines from there should be limited, with daily studies trading into oversold territory and warning of the need for a healthy corrective bounce. Should the market get down towards 0.8600 today, we like the idea of buying into the dip, with hourly studies to likely also be very oversold and thereby considerably increasing the likelihood of a playable short-term corrective bounce. STRATEGY: BUY @0.8605 FOR AN OPEN OBJECTIVE; STOP 0.8545. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON THURSDAY. POSITION SIZE SHOULD BE 3X TOTAL EQUITY.