Forex Today: US Dollar collapses ahead of US Retail Sales, FOMC's meeting

Major central banks will host their monetary policy decisions, though the Federal Reserve (Fed) remains in center stage. Expectations of a resumption of the easing cycle pushed the US Dollar lower, along with US Treasury yields as traders brace for the release of US Retail Sales data.

Here's what to watch on Tuesday, September 16:

The US Dollar Index (DXY), which tracks the buck's value against six other currencies, tumbles 0.32% at 97.30, near eight-week lows. US Retail Sales are projected to slow in August, rising 0.3% MoM versus 0.5% previously, which may further pressure DXY downward.  Other data expected is Industrial Production.

EUR/USD surged over 0.26%, above 1.1750 as market participants shrugged off Fitch downgrading France's sovereign credit rating from AA- to A+ due to a political deadlock expected after elections. European Central Bank (ECB) member Isabel Schnabel commented that "interest rates are in a good place as inflation stabilizes around our 2% target, and the economy remains resilient at full employment." Ahead on Tuesday the docket will feature ECB's Escriva speech, inflation on Italy, the ZEW Survey for September in Germany and the Eurozone, and Industrial Production for the whole bloc.

GBP/USD climbs above 1.3600 as traders await UK July jobs data, with the ILO Unemployment Rate expected to hold at 4.7%.  Additionally, market players are eyeing the Bank of England (BoE) policy decision on Thursday.

USD/JPY is trading lower as the US Dollar declines against most G10 currencies, while the Bank of Japan is expected to increase rates later this year.  Japanese data due Tuesday: August Exports are forecast to improve to a -1.9% YoY contraction (from July's -2.6%), while Imports are expected to decline -4.2% YoY, less than July's -7.5% drop.

USD/CAD tumbled sharply over 0.49% down below 1.3800 as investors priced in the Fed cut and an uptick in inflation data from 1.7% to 2%, right at the Bank of Canada's inflation target.

Gold prices continued to print record highs and seem poised to test $3,700 throughout the week as US Treasury yields reflect market players' bets for a 25-bps rate cut by the US central bank. If XAU/USD retreats below $3,650, expect a drop toward $3,600. Otherwise, further Bullion's upside is seen.