Weekly Wrap: Dollar correction extends

A second consecutive bearish close for the Dollar Index as Major crosses continue to trade within corrective patterns.

KEY EVENTS THIS WEEK:

AUD: Monetary policy minutes; CPI q/q; RBA Stevens speaks; Business confidence

CAD: Wholesale sales; Core Retail Sales; BOC rate ststament and decision; Press conference

CHF: Trade Balance

CNY: GDP q/y; Industrial Production; Flash Manufacturing PMI

EUR: Flash Manufacturing PMI; Flash Services PMI;

GBP: MPC Votes; Retail Sales; Prelim GDP

JPY: Trade Balance

NZD: CPI q/q; Trade Balance

USD: Core CPI; Unemployment claims; New Home Sales

Australian Dollar:

A slight increase of short positions has been added but price continues to whipsaw within a 2c range making positional trading tricky. We have now seen 2x Hammers near the 4-year lows which could either be an inverted Hammer (bullish) or Shooting Star (Bearish) if we break below 0.863. Until then we have to assume the correction and whipsaws will continue. RBA minutes are unlikely to provide much information but traders will look out for any hint of macro-prudential tools for the housing market. Stevens also speaks on Thursday which may provide further direction.

USD Dollar

The Dollar Index continues to be within a corrective phase but not really hinting an end to the bullish trend as of yet. There has been a slight fear of lower inflation pressures and Net longs have reduced slightly but we would need to break below 84 before becoming too concerned with the bullish move. Core CPI on Wednesday is the headline figure with any soft numbers likely to extend the dollar losses and help support AUD, EUR and GBP above their recent lows. USDCAD continues to grind higher and produce higher highs and lows, so favours buy-the-dip strategies.

Euro

As long as EURUSD remains below 1.30 then the downside towards 1.20 looms. INtraday price action has a bullish bias but overall price action appears corrrective which favours a resumption of the bearish move. EURCAD may have seen a cycle low at 1.40 with last week's bullish close at a 7-week high.

British Pound

The daily charts are showing the potential for a bullish wedge to form which if completed weould target the base near 1.65. Traders are marginally Net short on British Pound futures but not enough to read too much into it. Last week produced a Bullish Pinbar above the Nov '13 swing low so a case is building for GBP gains.

Japanese Yen

Early Asia trading has seen a gap-up to suggest a breakaway gap (bullish) and an end to the correction from the 110 highs. JPY Trade Balance could help support USDJPY if the numbers come in soft but we are more likely to see the catalyst come from US Core CPI.

Gold

The retest of $1240 has been achieved and we now see price oscillate around this key level. A convincing break above here invalidates the Double Top setup and could quickly see Gold target $1265. However we would need to see the USD extend losses which may be triggered by any soft GDP data. My bias is for data in US to be string and help support the USD and bring further downside on Gold.