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Euro (EURUSD, FXE, UUP): After a early week rally, it soon became a disappointing week for the bulls. The rally above the 1.34 handle was brief, as we are now trading at a monthly low, under 1.32. The economic sentiment numbers, CPI and PMI announced this week, were negative for the EU, and this weighed on the market.

This caused the European Commission in Brussels to revise their GDP projection for the EU economy to a negative 0.3 rather than a positive 0.1 as predicted earlier. This poor data prompted the following response:

"Olli Rehn, commission vice-president for economic and monetary affairs and the euro said:

'The ongoing rebalancing of the European economy is continuing to weigh on growth in the short term.

'The current situation can be summarised like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past, and growing investor confidence in the future.

'The decisive policy action undertaken recently is paving the way for a return to recovery,' he added. 'We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation.'"

The austerity policies favored by Germany and her friends has produced misery for vast numbers throughout Europe. Currently, the unemployment for the whole of Europe is 11.7, and is projected to peak at 12.2 by the EU Commissioners. The new EU unemployment, to be released on March 1, is estimated to be 11.8%.

How much longer will the voters in Europe continue to buy into the promise of prosperity tomorrow, but only after you suffer today? This weekend, there is an election in Italy where the former PM Berlusconi is trying to stage a comeback after the EU troika forced him into retirement in 2011.

Fearful Berlusconi will attract the anti-euro vote, the Germans are campaigning against him. The Telegraph reports:

"'Silvio Berlusconi has already sent Italy into a tailspin with irresponsible behaviour in government and personal escapades,' Schulz was quoted as saying in German daily Bild.

Schulz is the latest in a line of German politicians to express fears about a possible Berlusconi comeback largely due to worries he will halt Rome's reform drive that has helped to lift investor confidence in the eurozone.

Some top European business executives have also publicly commented on the vote, with the chief executive of German lender Allianz, Michael Diekmann, saying on Thursday that Italy needed a pro-European government capable of taking strong action."

The uncertainty of the election's outcome is weighing on the euro.

Next week in the U.S., there are numerous data reports. These include U.S. Consumer Confidence, Durable Goods Orders, a revised GDP number and another Bernanke speech. Considering there is a yearly trillion-dollar spending deficit, which the administration refuses to address, it is difficult to get real friendly to the USD. But specs, it seems, may have gotten euro long versus USD short, and there may be some liquidation of this trade. Continued bear input could take the EURUSD (FXE, UUP) close to the 1.30 handle.

Japanese Yen (JPY): After the rocket move of the yen from 80 to 94, the result of PM Abe's claim of deflation will be defeated, a result of the anticipated yen supply. At the suggestion of the G20, he has toned down his rhetoric about the high yen value, and has backed away from his threat to buy foreign sovereign debt.

The focus in the coming week may be the forthcoming Japan-U.S. Summit. A Japanese paper reports:

"'Eyes are on whether things will go as Mr. Abe hopes or President Obama will express concern over the policies instead of endorsing them,' said Masanobu Ishikawa, general manager of spot foreign exchange at Tokyo Forex & Ueda Harlow.

'There is a risk of the dollar tumbling against the yen' if the United States does not tolerate them, he added."

The decline of the yen has given a boost to the Japanese stock market, and initial public offerings have soared. After the huge run up in the yen, will there be some profit taking and or repatriation of funds prior to the U.S. meeting next week?

Canadian Dollar (NYSEARCA:FXC): In our end of the week summary last week, we expressed an opinion the C$ looked weak, and it was headed for the 1.02 area. Indeed, that was how it played out, with the USD going to 1.0254. Today, the catalyst was the extremely poor M/M Retail Sales number, a negative 2.1%.

Earlier in the week, the C$ attracted selling because of the weak crude oil market. The West Texas Intermediate crude contract sold down into the low 90s. A glut exists, however, of crude oil in the central part of North America. This glut, combined with inadequate pipeline capacity, means the Alberta sands oil trades as much as a $25 per barrel discount to the WTI. This revenue reduction is hurting Alberta Providence, where they are confronted with a deficit of C$4B.

We note the C$ futures open interest at the CME has gone from 143K to 178K contracts during the last five sessions. Usually, markets go in the same direction as a big change in the open interest. Though the C$ bears have had a nice move, this tells us it may not be over.

Australian Dollar (NYSEARCA:FXA): Unlike the Canadian dollar, the open interest in the Australian dollar has gone down, and is now about 29K contracts less than is the C$. This year's high was made on January 10th at 1.0590. Then, the open interest in the A$ was 207K contracts. At that time, the OI in the C$ was only 140K. The liquidation of the big A$ open interest, which only resulted in a sell-off to 1.0220, is impressive. We intend to study the A$ next week, as we suspect there may be a trade on the long side.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Weekly Forex Review - Where Do We Go From Here?