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Risk correlated assets finding renewed bids German plans to strengthen Spanish banks inspire confidence ECB Draghi says the central bank is ready to act if necessary EUR/USD next key resistance comes in by 1.2625 Bank of England rate decision due later today Risk correlated assets have been very well bid over the past few sessions, with currencies and equities reversing sharply as market participants are able to let go of the worst of their fears for the time being. The doom and gloom sentiment that had taken hold in the previous week has faded and investors are once again warming up to the idea that the Eurozone may be able to escape the current crisis and avoid breakup. News that Germany is drafting plans to strengthen the Spanish banks without expecting further reforms or any formal aid deal has been seen as a huge positive and this has been once of the primary drivers of this latest risk-on trade. Although the European Central Bank left policy on hold as was expected, comments from ECB President Draghi that the central bank is willing to act if necessary have also been helping to bolster sentiment. The Euro now eyes a retest and break of the previous weekly high by 1.2625, while the Yen has also been very well offered on the liquidation of safe haven plays. Still, at the end of the day, this is a market that had been in desperate need of technical correction following some intense risk-off moves, and at this point, we would attribute the recent price action more to the technicals than fundamentals. European leadership will really need to dig in and come up with some serious plans to resuscitate the region for there to be any hope of a sustained Euro recovery. Until then, the strategy should be to look to sell these currency rallies into additional strength. Looking ahead, the Bank of England is slated for a rate decision later today. While no policy change is expected, there is a good deal of speculation that the Bank of England will shift to a more dovish stance in light of the ongoing pressures in the global macro economy. ECONOMIC CALENDAR
TECHNICAL OUTLOOK 
EUR/USD:The market is in the process of correcting from some violently oversold levels after breaking to yearly lows just under 1.2300. While our overall outlook remains grossly bearish, from here we still see room for short-term upside before a fresh lower top is sought out. Look for the latest daily close back above 1.2545 to open the door for acceleration into the 1.2800-1.3000 area, where fresh offers are likely to re-emerge. 
USD/JPY:The latest setbacks have been rather intense, with the market collapsing through the 200-Day SMA before finally finding support by 77.65. We have since seen attempts at recovery and we contend that the market should continue to break higher, with sights ultimately set on a retest and break of the 2012 highs by 84.20 further up. However, at this point, we will need to see a break and close back above 80.00 to officially alleviate downside pressures and reaffirm bullish outlook. 
GBP/USD: Daily studies are now well oversold and from here risks seem tilted to the upside to allow for a necessary short-term corrective bounce after setbacks stalled just shy of the 2012 lows from January. Look for the latest daily close back above 1.5440 to strengthen short-term bullish outlook, with acceleration projected into the 1.5600-1.5800 area where a fresh lower top will be sought out in favor of underlying bear trend resumption. 
USD/CHF: While we retain a broader bullish outlook for this pair, with the market seen establishing back above parity over the coming weeks, shorter-term risks are for more of a corrective pullback to allow for the market to establish a fresh higher low. As such, we see risks for weakness over the coming sessions towards the 0.9300-0.9500 area before the market looks to reassert its bullish momentum and broader uptrend. --- Written by Joel Kruger, Technical Currency Strategist To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com 
Risk rallies viewed as technical corrections; look to sell Euro consolidating above 1.3000 ahead of next drop Investors digesting implications of latest French and Greek elections Spain back in focus as the country attempts to rescue local bank German industrial production comes in well above consensus Australian government announces return to budget surplus Although we have seen a bit of a bounce in risk correlated assets, we contend that the rally is nothing more than some minor consolidation ahead of the next wave of risk liquidation. The Euro managed to close back above 1.3000 on Monday, but from here, we expect any additional rallies to be very well capped ahead of 1.3200 in favor of an eventual retest of the 2012 lows from January at 1.2620. Market participants are still digesting the weekend election results out of France and Greece, and there is a good deal of concern as to whether the newly elected governments will acceded to the austerity measures imposed to ease the debt crisis. In Greece, the situation is highly uncertain, with the lack of a clear majority potentially creating a situation where austerity measures might be significantly reduced in order to appease the opposition. Elsewhere, Spain is back in the headlines, as the country attempts to rescue its third largest bank.
