NZD/USD edges lower toward 0.71 as USD recovers modestly on upbeat PMI data

  • NZ GDT auction price index rises 2.2%.
  • Manufacturing activity expands at a robust pace in the U.S.
  • The US Dollar Index recovers from multi-month lows.

After touching its highest level in more than three months at 0.7130, the NZD/USD pair lost its traction in the early NA session and erased its daily gains. As of writing, the pair was trading at 0.7106, virtually unchanged on the day.

On Tuesday, the Global Daily Trade price index in New Zealand increased by 2.2% following the previous 3.9% contraction two weeks ago. However, the NZD failed to take advantage of the upbeat reading as investors remained focus on the manufacturing PMI data from the United States.

The US Dollar Index, which plummeted to its lowest level since mid-September at 91.47 after starting the day with a bearish gap, finally started to retrace its daily losses as the PMI data released by IHS Markit showed that the manufacturing sector continued to expand at a faster-than-expected pace. The underlying details of the report showed that the employment in the sector grew at its best rate since September 2014 while input prices, cost inflation, increased for the second straight month.

With no significant macroeconomic data releases from New Zealand in the remainder of the session, the pair's price action is likely to continue to be driven by the DXY.

Technical levels to consider

With a decisive break above 0.7130 (daily high/200-DMA), the pair could aim for 0.7200 (psychological level/Oct. 16 high) and 0.7240 (Sep. 29 high).  On the downside, supports align at 0.7100 (psychological level), 0.7030 (100-DMA) and 0.6955 (Dec. 20 low).

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