• NZD/USD recovers intraday losses as the US Dollar struggles to resume its upside journey.
• The risk profile remains favorable for risk-sensitive assets.
• Investors await the US NFP the most in a US heavy-data week.

The NZD/USD pair recovers strongly from the intraday low of 0.6170 in in Wednesday’s New York session. The Kiwi asset bounces back as the US Dollar (USD) struggles to resume its upside journey after correcting from a fresh two-week high.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades in a tight range near 101.60. Meanwhile, the market sentiment remains risk-averse amid uncertainty ahead of the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published later this week. S&P 500 futures have posted significant losses in the American session, portraying a decline in the risk-appetite of market participants.

Investors keenly await the US NFP data release as it will shape the Federal Reserve’s (Fed) interest rate path. The Fed is widely anticipated to start reducing interest rates from the September meeting. However, traders remain split over the likely Fed interest rate cut size. According to the CME FedWatch tool, the likelihood of a 50-basis points (bps) interest rate reduction in September is 39%, while the rest favors a 25-bps decline to 5.00%-5.25%.

The possibility of a 50-bps interest rate reduction could increase if the US NFP report shows that the labor demand remained weak and the Unemployment Rate increased in August. On the contrary, steady or upbeat labor market data would weaken the same.