NZD/USD retests 0.6250 as USD Index looks prone to further downside, US NFP in focus

• NZD/USD has sensed some pressure after retesting the critical resistance of 0.6250.
• US Treasury would default in addressing payment obligations if the White House fails to raise the debt ceiling in time.
• The consensus for official US NFP data says an addition of fresh 179K jobs in April lower than the former release of 236K.

The NZD/USD pair has retested the potential resistance of 0.6250 in the early European session. The Kiwi asset is expected to stretch its upside further as the US Dollar Index (DXY) might show more weakness amid the absence of supportive indicators.

S&P500 futures have added significant gains in the Asian session, signaling that investors have digested US banking jitters and are cheering a consideration of a pause in the policy-tightening spell by the Federal Reserve (Fed). The USD Index is consolidating near the critical support of 101.07 and is prone to further downside amid rising concerns over US debt ceiling saga.

Investors are worried that a delay in raising the US debt ceiling by the White House will significantly impact the economic output and labor market as US Treasury would default in addressing payment obligations.

The Federal Reserve (Fed) hiked interest rates by 25 basis points (bps) and cited that further action will be more data-dependent. Therefore, investors are shifting their focus towards the United States Nonfarm Payrolls (NFP) data, which will release on Friday. On Wednesday, the US Automatic Data Processing (ADP) agency reported an addition of fresh 296K jobs in April vs. the estimates of 150K and the former release of 145K. Upbeat US ADP data indicates tight labor market conditions in the US economy.

However, the consensus for official US Employment data depicts the addition of fresh 179K jobs in April, lower than the former release of 236K. The Unemployment Rate is seen unchanged at 3.5%.

On the New Zealand Dollar front, the Kiwi focused least on the downbeat Caixin Manufacturing PMI data. The economic data has landed at 49.5, lower than the estimates of 50.3 and the former release of 50.0.

It is worth noting that New Zealand is one of the leading trading partners of China and weak Chinese manufacturing PMI would impact the New Zealand Dollar outlook.