NZD/USD approaches 0.6080 as USD Index prepares for a fresh downside, US NFP in focus

• NZD/USD is aiming to recapture 0.6080 as the USD Index is preparing for a fresh downside.
• US equities have managed to maintain Thursday’s bullish sentiment, portraying an upbeat market mood.
• Hopes of a recession and weak economic activities are supporting a pause in the Fed’s policy-tightening spell.

The NZD/USD pair has moved to near the crucial resistance of 0.6080 in the Asian session. The Kiwi asset has gained strength as the US Dollar Index (DXY) is preparing for a fresh downside. The USD Index is expected to refresh its weekly low below 103.50 as support for a pause in the Federal Reserve (Fed)’s rate-hiking spell by some Fed policymakers has trimmed its appeal.

S&P500 futures have added some gains in Asia. US equities have managed to maintain Thursday’s bullish sentiment, portraying an improvement in the risk-appetite theme. A cheerful market mood has improved the demand for US government bonds. This has led to a sheer decline in the 10-year US Treasury yields to 3.6%.

The USD Index is expected to extend its downside journey as Fed policymakers are divided about June’s monetary policy. Hopes of a recession and weak economic activities are supporting a pause in the policy-tightening spell while stubborn core inflation and upbeat labor market conditions are favoring one more interest rate hike.

Going forward, the release of the United States Nonfarm Payrolls (NFP) data will provide clear guidance. Analysts at TD Securities see US payrolls slowing modestly in May, advancing at a still strong 200K pace for a second consecutive month. They also look for the Unemployment Rate to stay unchanged at a historical low of 3.4%, and for wage growth to print 0.3% MoM (4.4% YoY).

On the Kiwi front, upbeat Caixin Manufacturing PMI (May) infused fresh blood into the New Zealand Dollar. The economic data has landed at 50.9, higher than the consensus and the prior release of 49.5. A figure above 50.0 bifurcates expansion and contraction phases and Chinese factory activities have landed in expansionary territory.

It is worth noting that New Zealand is one of the leading trading partners of China and upbeat Chinese factory activities support the New Zealand Dollar.