I want to add parent category to highlighted category so that while navigating on front end, it should be XYZ -> BLUSA
I dont want to create new parent category then add new child category because this side contains almost 2800 products.
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Under the category Default Category you should create the new parent category which you wish to use "XYZ".
Once this has been created, you should be able to drag the existing categories into this and they will become children of that category maintaining their existing configuration including products.