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  • The index picks up extra pace closer to 97.00, fresh 2018 peaks.
  • The softer tone in CNY pushes USD/CNY to new highs near 6.93.
  • US Retail Sales surprised to the upside in July.

The greenback, in terms of the US Dollar Index (DXY), is now advancing further and trades at shouting distance from the 97.00 handle, or fresh 2018 highs.

US Dollar up on CNY weakness

The index navigates the area around the 97.00 handle – levels last seen in June 2017- following the persistent depreciation of the Chinese Yuan. In fact, USD/CNY climbs to the boundaries of the 6.93 handle today, the highest level since January 2017, collaborating at the same time with the up move in the buck.

The greenback also appears supported by investors’ ‘flight-to-safety’ in response to the heightened concerns in the EM FX universe, where the collapse of the Turkish Lira remains in centre stage along with contagion fears and despite Fed’s J.Bullard talked down these concerns in earlier comments.

Also adding to the upbeat tone in the greenback, the VIX index (aka ‘the panic index’) spiked to session tops in the 16.0 handle. In this regard it is worth mentioning that speculative net shorts in VIX climbed to fresh yearly peaks during the week ended on August 7, as per the latest CFTC report.

In the data space, US Retail Sales expanded more than forecasted during July, while the NY Empire State manufacturing gauge also came in on the strong side for the current month.

US Dollar relevant levels

As of writing the index is up 0.18% at 96.84 and a breakout of 96.99 (2018 high Aug.15) would aim for 97.00 (psychological level) and then 97.87 (61.8% Fibo of the 2017-2018 drop). On the downside, the next support lines up at 95.63 (10-day SMA) seconded by 95.12 (21-day SMA) and finally 94.08 (low Jul.26).