NZD/USD eyes recovery extension above 0.6500 amid cheerful market mood, NZ Inflation eyed

• NZD/USD is seeking more upside above 0.6500 as the risk profile is supporting risk-perceived assets.
• US inflation softening resulted in a decline in the US Dollar Index below 101.60.
• Investors are awaiting the release of the US S&P PMI and NZ Inflation data for fresh cues.

The NZD/USD pair is aiming to extend its upside journey above the psychological resistance of 0.6500 in the early Asian session. The kiwi asset is eyeing a recovery extension amid a cheerful market mood. Soaring expectations of a further slowdown in the pace of policy tightening by the Federal Reserve (Fed) is infusing strength into the risk-sensitive assets.

In early Tokyo, S&P500 futures are showing marginal losses after a bullish Monday. Caution is stemming, however, the overall market sentiment is strictly positive. Investors’ risk appetite is still solid as meaningful softening United States inflation is setting grounds for a deceleration in the interest rates hiking pace.

The US Dollar Index (DXY) has dropped to near 101.60 after sensing selling pressure while attempting to cross the critical resistance of 101.87 after commentary from US Treasury Secretary Janet Yellen. US Yeller cited on Monday that overall, she has a “good feeling that inflation is coming down.” However, it reiterated the fact that the “US labor market is still very tight,”

The next move that might trigger volatility in the US Dollar is the release of the preliminary United States S&P PMI (Jan) data, which is seen on Tuesday. Investors should brace for a contraction in economic activities. The Manufacturing PMI is seen lower at 46.1 while the Services PMI might contract to 44.5.

On the kiwi front, the New Zealand Dollar will display a power-pack action after the release of Wednesday’s Consumer Price Index (CPI) data. Annual Consumer Price Index (CPI) data for the fourth quarter of CY2022 is seen declining marginally to 7.1% from the former release of 7.2%. On a quarterly basis, the inflation rate might trim to 1.3% from the prior release of 2.2%.