Commodity Currencies Rally As Coronavirus Fears Ease

The commodity currencies such as the Australian, the New Zealand and the Canadian dollars advanced against their major counterparts in the European session on Tuesday, as signs of slowing coronavirus spread and expectations of more central bank and government stimulus to combat virus outbreak underpinned sentiment.

The rate of new infections slowed in Italy, Spain and the centre of the US outbreak - New York.

Japanese Prime Minister Shinzo Abe pledged to roll out an unprecedented economic stimulus as he prepares to declare a state of emergency for the capital Tokyo and six other prefectures, for a period of about one month.

Singapore announced an additional S$5.1 billion (US$3.6 billion) stimulus to save jobs and protect the livelihoods of people amid the spread of coronavirus.

The aussie received an additional support from the Reserve Bank of Australia's monetary policy decision to leave its official cash rate at a record low of 0.25 percent.

The RBA board also kept its targeted yield on 3-year government bonds at around 0.25 percent.

In economic releases, data from the Australian Bureau of Statistics showed that Australia posted a seasonally adjusted merchandise trade surplus of A$4.361 billion in February.

That beat expectations for a surplus of A$3.750 billion and was down from the downwardly adjusted A$4.745 billion surplus in January (originally A$5.210 billion).

The latest survey from the Australian Industry Group showed that the service sector in Australia continued to contract in March, and at a much faster rate, with a Performance of Service Index score of 38.7.

That's down from 47.0 in February and it moves further beneath the boom-or-bust line of 50 that separates expansion from contraction.

The aussie spiked up to a 1-week high of 0.6194 versus the greenback and near a 2-week high of 67.46 versus the yen, from its early lows of 0.6075 and 66.37, respectively. The next possible resistance for the aussie lies around 0.68 versus the greenback and 75.00 versus the yen.

The aussie firmed to 1.7550 against the euro, its highest level since March 12. On the upside, 1.70 is likely seen as the next resistance level for the aussie.

Reversing from its early lows of 0.8575 against the loonie and 1.0247 against the kiwi, the aussie moved up to 6-day peaks of 0.8682 and 1.0319, respectively. The aussie is poised to find resistance around 0.90 against the loonie and 1.06 against the kiwi.

The kiwi climbed to near a 4-week high of 1.8060 against the euro, 1-week highs of 0.6016 versus the greenback and 65.46 versus the yen, off its early lows of 1.8217, 0.5919 and 64.66, respectively. The kiwi is seen locating resistance around 1.70 against the euro, 0.64 versus the greenback and 70.00 versus the yen.

The loonie appreciated to a 1-week high of 1.4012 versus the greenback, near 5-week high of 1.5203 against the euro and near a 2-week high of 77.71 versus the yen, after dropping to 1.4143, 1.5258 and 77.08, respectively in early deals. If the loonie rallies further, it is likely to test resistance around 1.30 versus the greenback, 1.45 against the euro and 0.80 versus the yen.

Looking ahead, Canada Ivey PMI for March and U.S. consumer credit for February will be featured in the New York session.