NZD/USD eyes more downside to near 0.6130 as risk-on impulse retreats, US PMI in focus

• NZD/USD is exposed to 0.6130 after retreating from 0.6180 as the risk-on mood has faded.
• The 10-year US Treasury yields have jumped above 3.93% amid rising fears of more rates by the Fed.
• Investors are expecting an increase in the Caixin Manufacturing PMI to 50.2.

The NZD/USD pair delivered a downside break of the sideways auction formed in a range of 0.6160-0.6182 in the Asian session. The Kiwi asset has now slipped further and is declining towards 0.6130 in the early European session as the risk-on profile has retreated after a recovery move.

The US Dollar Index (DXY) has extended its revival move to near 104.50 as galloping consumer spending from households in the United States economy is bolstering the case of continuation of policy tightening by the Federal Reserve (Fed).

S&P500 futures have surrendered their entire gains added in the Asian session, portraying a sheer recovery in the risk aversion theme. Also, the 10-year US Treasury yields have jumped above 3.93%.

Bearish bets for the New Zealand Dollar are escalating as investors are getting anxious ahead of the release of the Caixin Manufacturing PMI (Feb) data, which will release on Wednesday. Investors are expecting an increase in the PMI figures to 50.2 from the former release of 49.2. The reopening of the Chinese economy with a promising economic outlook due to fiscal stimulus has backed bullish bets for the Caixin PMI data.

It is worth noting that New Zealand is one of the leading trading partners of China and higher manufacturing activities will also strengthen the New Zealand Dollar.

Inflationary pressures in the New Zealand economy could decelerate ahead as retail demand has dropped firmly. The Retail Sales data for the fourth quarter of CY2022 has contracted by 0.6% while the street was expecting an expansion of 1.5%. This might provide some relief to the Reserve Bank of New Zealand (RBNZ).