The Source/Targets for translation are configured in the publications properties, in the Translation tab. I think that XPM refers to the publications configuration to determine the target.
I think that the context publication for content also has to be configured correctly in XPM settings. e.g. english components are set in Content EN publication from pages in the english website publication, spanish in Content ES for the spanish website publication etc... Because this will also determine the "initiating" publication context.