The US dollar cracked some tough resistance levels on Tuesday after a solid retail sales report. The dollar was the top performer among the majors while the kiwi languished once again. Japanese GDP and Australian wages are up next.
US retail sales showed that the dollar bulls don't need particularly great economic data to continue the latest run, just numbers that are solid enough to keep 3-4 Fed hikes this year in play. The main retail sales headlines met estimates, but revisions to the March numbers higher meant for a stronger report overall.
The USD reaction was dramatic as the euro, sterling, New Zealand dollar and gold broke to fresh medium-term lows. Perhaps the most-important technical move was in USD/JPY as it climbed above the May high and the 200-day moving average including a close above those levels. That break came in tandem with a rise in US 10-year yields above the 2011 high of 3.05%.
Looking ahead, a related market to watch is the 30-year yield. Twice this year it has tried to break above major resistance in the 3.22%-3.25% range and failed. It's now making a fresh attempt and if it breaks, bond gurus like Gross and Gundlach are saying it's a watershed for a bond bear market – and perhaps a USD bull market to go with it.
Expect continued big moves in FX in the day ahead. Data up next includes the second look at Q1 Japanese GDP and the Australian wage price index for Q1.