The US dollar index continues to push higher hitting its highest levels since early September as the risk aversion trade returns with a vengeance. The dollar index has posted a high of so far of 77.85 with the Euro suffering the most on investor fears about the level of debt contagion in the Euro zone.

The pound also suffered on the markets today after retail sales for November came in lower than expected, posting a decline of 0.3% against an expectation os a rise of 0.5%.

US weekly jobless claims came in higher than expected at 480k, against an expectation of 465k, but it was last nights FOMC statement that set the tone for today as the dollar gained across the board.

EURUSD– this morning’s break below the 1.4480 level in Asia, has provoked a significant short covering rally in the dollar, and has opened up a test of the 1.4120 level, which is the 38.2% Fibonacci retracement of the up move from 1.2460 to the twin highs at 1.5145. While fears about the debt situation in the Euro zone persist the Euro will continue to remain under pressure.

GBPUSD – the pound has slipped below the 1.6200 level on the back of the poor retail sales data and looks all set to test the key 1.6000 level over the next few days. A low today of 1.6080 has been the extent of the down move so far. Any rallies should find resistance around 1.6220 and 1.6300.

EURGBP – a close below 0.8875 could well prove negative in the long term for the Euro here, but it would need a break of 0.8805/10 to propel the momentum downward. A recovery above today’s highs at 0.8920 is needed to stabilise and diminish the downside pressure.

USDJPY – continues to benefit from US dollar strength but is struggling around the cloud resistance between 90.30 and 90.75. A break and close above 90.75 could well propel the dollar towards the 92.70 area. It does need to stay above trend line support at 89.25 to maintain the current momentum.