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The US dollar was one of the strongest major currencies on Friday, following mildly hawkish comments from Federal Reserve Chairman Ben Bernanke on Thursday and the release of US data at 8:30 ET. Yesterday, Bernanke said that the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently” and to "prevent the emergence of an inflation problem down the road." However, he also said that he and his colleagues at the Federal Reserve "believe that accommodative policies will likely be warranted for an extended period." Meanwhile, the US trade deficit for the month of August unexpectedly narrowed to $30.71 billion from $31.85 billion thanks to a 0.2 percent rise in exports and 0.6 percent drop in imports.

Looking ahead to next week, event risk won’t really pick up until Wednesday morning, when the Commerce Department is forecasted to report that US retail sales slumped 2.1 percent in September, after jumping by the most since January 2006 in August at a rate of 2.7 percent. The decline is likely to be due primarily to a drop in auto sales relative to recent months. For example, spending on motor vehicles and parts rocketed 10.6 percent higher in August as the “cash for clunkers” program came to an end, and demand is likely to have fallen without the government-sponsored incentive.

Then, on Wednesday afternoon, the minutes from the Federal Reserve’s last meeting on September 22-23 will be released. Following that meeting, the policy statement initially led the US dollar to sell-off against the most popular currencies as the central bank maintained a neutral tone and repeated that they would keep rates "exceptionally low" for an "extended period." However, the currency subsequently bounced back as the overall sentiment of the statement was optimistic, with the FOMC saying that "economic activity had picked up" while conditions in the financial markets have "improved further." Based on Bernanke’s recent commentary, traders will likely be looking for additional signs of when the central bank will start raising rates.