NZD/USD recovers yesterday's losses, China PMI offers little help

• The NZD/USD pair has recovered yesterday's losses, bolstering the bullish setup.
• The gains could be capped by dismal China Caixin PMI reading.

Currently, the NZD/USD pair is trading at 0.6555, up 0.60 percent on the day.

The currency pair fell to 0.6513 yesterday after a stronger-than-expected US wage growth sent the 10-year treasury yield and the US dollar higher. Moreover, stronger wage growth is seen as a key component underpinning the Federal Reserve's plans to raise interest rates.

So far, however, the American dollar has failed to capitalize on yesterday's strong data, possibly due to Brexit optimism.

Further, the Aussie dollar also picked up a bid on the back of a better-than-expected trade balance number. That has likely had a positive impact on the NZD.

Indeed, the quick recovery from yesterday's lows validates the early signs of a bullish reversal on the technical charts. Still, a convincing break above 0.6572 (50-day EMA) may not happen today as the China Caixin PMI released a few minutes ago showed the manufacturing sector barely expanded in October.

More importantly, new export orders, an indicator of future activity, remained in contraction phase for the seventh consecutive month, highlighting the deepening impact of the trade war with the US. This could be a cause for concern for the commodity dollars.

NZD/USD Technical Levels