Friday's US employment numbers were not good. Sure, the Washington in-crowd and their army of supporters in the media will tout the drop in the unemployment to 8.1% from 8.3% in the prior month, but that is only part of the story.

Only 96K jobs were created in August. The July NFP job creation was reduced by 20K to 142K, so how does that reduce the unemployment rate to 8.1%?  Somehow the Dept. of Labor decided 368K people dropped out of the labor force. This reduces the percentage of labor participation by Americans in their working years to 63.5%, down from 63.7%, and the lowest since 1981. But it is an election year, and this arbitrary reduction in the labor force size will give incumbent politicians a talking point.

The poor numbers will increase the spotlight on the Fed meetings this week. Bernanke had said the Fed is prepared to do more if the employment does not improve. Unlike the ECB President, and fellow MIT grad Mario Draghi, who seems to talk, bluff and take mini steps to address the European debt problems, Bernanke is free to move quicker.

But will he? There is a rumour of a Goldman memo, released after the employment numbers, that the chance of an immediate liquidity injection which will be announced on Thursday is better than 50%. Perhaps the note is wishful thinking by a major recipient of  Bernanke's largesse, but this new program will not get votes on Main Street. Already, average Americans are hurting because of the increase in food and energy prices, and the link between the money printing and inflation will become a campaign issue.

The European markets have been energized by the Draghi promises to do "whatever it takes" to defend the euro and eliminate the risk of a break up; this came at a time when the euro specs were big shorts. Some of these shorts have covered the EURUSD (FXE, UUP, UDN), and the market acted like there is more taking place Friday.

In our latest COT analysis, we noted that futures speculators had flipped to the short side of the USD. It has been almost a year since the spec was short the USD. To get to a net short in the combined USD futures position, when the specs were long the USD and short the euro, the USD had to absorb the selling of thousands of contracts versus spec purchases of the Australian, Canadian, and to a smaller extent the NZ Dollar.

The CME reported Thursday's trade in the futures, there was again a large increase in the Canadian Dollar open interest - up 22,785 contracts - and the Australian Dollar - up 16,405 contracts against which the USD was probably sold. Buying both the commodity currencies and short covering in the euro, are putting pressure on the USD.

There are some notable risk events this week in addition to the mysterious Fed and their plans. An election in Holland is scheduled on the 12th, the same day the German Court rules on one of the euro bail out schemes. In Holland, both the far right Party for Freedom and the Socialist want to withdraw from the euro.

We wish to see the results of this week's events. Markets often go higher or lower than we can anticipate. Should we reach the 1.30 handle on the EURUSD, we wish to be a seller. This would be close enough to the rare weekly chart breakaway gap to suggest the euro recovery from 1.2042 was over.