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- The US dollar was back in favour on Thursday as a strong US retail sales report fuelled an already buoyant greenback. The dollar index rose to its highest level since August 27, just shy of 93.00.
- Prior to the data, dollar sentiment had recovered following pressure on commodities and a short-term break lower in EURUSD.
- EURUSD maintains a weaker tone and Thursday's sell-off has confirmed a resumption of bearish pressure. After clearing horizontal support through 1.1800 the pair extended through Monday's low of 1.1770 and has tested below 1.1758, 61.8% of the Aug 20 - Sep 3 rally. Further weakness would open 1.1735, Aug 27 low ahead of the key support at 1.1664, the Aug 20 low.
- With the majority of the euro move witnessed before the US data, USDJPY was most impacted in the retail sales aftermath, rising around 40 pips from 109.40 to 109.80. This extends the bounce from yesterday's noted support at 109.11.
- Elsewhere dollar gains were broad based with GBP, AUD, NZD, CAD and CNH all falling close to 0.5%. The offshore Yuan move represents the biggest drop in nearly a month as concerns on China Evergrande Group's debt crisis and Beijing's latest push to rein in private industries exacerbates market sentiment.
- Notable weakness was seen in the Swiss franc, losing 0.75% against the dollar. USDCHF hovers just beneath the July highs of 0.9275 which if breached would see the pair trading at it's best levels since April. Interestingly the downtrend drawn from the 2020 highs looks to intersect around 0.9280, strengthening the importance of this area.
- UK Retail Sales will kick off a light calendar on Friday before final readings for Eurozone CPI are released. The week will be capped off with US consumer sentiment data from the University of Michigan.