NEW YORK ( BBH FX Strategy) -- The market misread the Fitch downgrade of Italy and Spain before the weekend. The rating agency was largely lagging the other rating agencies and the market. With Tokyo markets closed, it was fairly easy to extend the pre-weekend euro losses, but with talk of European bank recapitalization, German Chancellor Angela Merkel and French President Nicholas Sarkozy's pledge for new and bolder action by Nov. 3 helped the corrective forces regain control of the euro and tend it through the resistance area of $1.3500 to $1.3525 encountered Friday.When we first identified the risk of an upside correction earlier last week, we highlighted the area of $1.3600 to $1.3700. This still seems like a reasonable initial target. Market positioning using the Commitment of Traders as a proxy warns that the short-term trend following, momentum traders stretched -- very short euros and sterling.