NZD/USD retreats from two-week top, slides to mid-0.5900s amid goodish USD recovery

• NZD/USD fails ahead of the 0.6000 psychological mark for the second straight day.
• A modest USD rebound from over a two-week low exerts pressure on spot prices.
• Fed rate cut bets should cap the USD and support the pair amid the risk-on mood.

The NZD/USD pair faces rejection near the 50-day Simple Moving Average (SMA) on Thursday and retreats from the vicinity of the 0.6000 psychological mark, or over a two-week high touched the previous day. Spot prices slide to a fresh daily low, around the 0.5950 region during the early European session and, for now, seem to have snapped a two-day winning streak.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, stages a modest recovery from its lowest level in over two weeks and turns out to be a key factor exerting downward pressure on the NZD/USD pair. The USD uptick lacks any obvious fundamental catalyst and could be attributed to some repositioning ahead of the US Producer Price Index (PPI) report, due for release later today.

In the meantime, the growing acceptance that the US Federal Reserve (Fed) will lower borrowing costs in September might hold back the USD bulls from placing aggressive bets and lend some support to the NZD/USD pair. Moreover, traders ramped up their bets for at least two Fed rate cuts by the year-end following the disappointing release of the July US Nonfarm Payrolls (NFP) and in-line US consumer inflation figures.

Furthermore, the upbeat market mood, bolstered by an extension of the US-China trade truce for another three months and the US-Russia summit aimed at ending the war in Ukraine, should cap the safe-haven buck and limit losses for the risk-sensitive Kiwi. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further intraday depreciating move for the NZD/USD pair.