An old crisis introduced in new ways

The Euro zone is back in the headlines with the Cyprus bailout taking a turn for the worst.  The decision to levy the deposits on bank deposits has cause a panic in the country, as well as creates a dangerous precedence in the euro zone bailouts.  This has cause the short position that I have on the Euro to make strong gains at the open (with the EUR/HUF short as the exception) and I have put in some stops in the event that there is a strong rally back overnight.  I am still net short the Euro to a variety of currencies the majority of which are positive correlation plays*, as this plays out I will look for an opportunity to add to the negative correlation plays as the EU leaders hopefully recognize the situation and take action.

* notes to an article that I am in the prosess of writing about the Euro short play:

To elaborate more on the dual methods in which the EUR can decline, there is what I will refer to as a negative correlation to the markets and a positive correlation.  The negative scenario will be based on stimulus coming into the markets from the EU, which could include a combination of asset purchases as well as increased spending and the lowering of interest rates (Markets up EUR down).  This will lead to the EUR becoming a funding currency and putting pressure on the value to higher yielding/higher growth currencies.  The positive correlation scenario (Markets down, EUR down) is where a lack of action in the EU keeps the region in contraction and causes the currency to decline as money in search of higher returns starts to flee back into safer assets in non-Euro denominations.  There are different pairings that will work with the two different scenarios (albeit with their own individual risks which we will not go into here).  The ability to classify these pairs and the causes for holding them will help to move the strategy in the correct direction.