FX Overseas: Weaker Yen Boosts Exports

EUR/USD trended higher throughout the morning session, supported by another solid rally by EUR/JPY cross. Technically, resistance levels are seen at 1.3232, the 50% retracement of the February to April selloff and then at the 62% retracement of the move at 1.3344. On the other hand, support levels are seen at 1.2974 and 1.2920. In terms of macroeconomic news flow, Germany's Bundestag lower house voted in favour of Cypriot bailout with large majority. However, German Chancellor Merkel fell short of a coalition majority on the bailout vote, had to rely on opposition to win a majority. Furthermore, the bailout not only requires ratification by parliaments in other EU member states, it must also be put to Cyprus's parliament for a vote -- a previously unscheduled plan. The risk-on sentiment was also supported by solid demand for the latest round of debt issuance from Spain and France. As of today, the Spanish Treasury has completed 43.3% of mid- and long-term 2013 funding plan.

GBP/USD
GBP/USD also edged higher, as market participants brushed off the release of weaker than expected UK retail sales, which as stated by the ONS was severely affected by adverse weather conditions. The ONS said that coldest March since 1962 hurt sales of spring goods at department, clothing and household goods stores. Technically, resistance levels are seen at 1.5424, the 38% retracement of the January to March sell-off, followed by 1.5550 and 1.5606.

USD/JPY
Japan’s March trade data showed that exports grew by 1.1% Y/Y, stronger than expected, while import growth was 5.5% Y/Y, slightly weaker than expected. As such, the trade deficit shrank more than expected. Still, in the medium term, the JPY depreciation will gradually help increase export volumes and outweigh the inevitable rise in import prices as a result of a weaker JPY. Separately, it was reported that the BoJ to raise CPI forecast according to sources. The central bank may say it expects to achieve 2% inflation as early as spring 2015 at its forthcoming policy board meeting.