NZD/USD dips as Warsh turns hawkish; RBNZ meeting looms

USD:

After a hawkish speech by Fed Chair Warsh at the Jackson Hole Symposium, the US dollar gained broadly across the board on Friday.

Warsh stated: "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted this as him pushing back against the recent easing in financial conditions, leading to a retightening.

This process has extended the corrections in "debasement" trades, with the greenback returning to levels seen before the US Treasury announcement. The likelihood of a rate hike at the September meeting has also risen, with the market now pricing in a 60% chance of a hike.

Warsh also reiterated that the Fed is now solely focused on inflation and noted that progress has been slow. Consequently, only a soft US CPI report could reduce the probabilities below 50% and prevent the Fed from hiking at the upcoming meeting.

If the probabilities remain at or above 50%, the Fed may be forced to hike anyway, as failing to do so would send a dovish signal.

NZD:

On the New Zealand dollar side, the RBNZ is widely expected to raise the OCR by 25 basis points, bringing it to 2.75%. The central bank's latest projections indicated the OCR could rise to 3.00% by year-end and then hold at that level for the rest of 2027. Market pricing matches the RBNZ forecast for 2026, but diverges for 2027, where it expects two more rate hikes.

Therefore, the kiwi faces downside risk if the RBNZ fails to meet or outpace market expectations. Attention will be on the updated macroeconomic projections and signals on the future policy path.

NZDUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME

The NZDUSD pair has been in a textbook uptrend, featuring clean swing highs and swing lows. The price retraced from a key resistance zone near 0.5990 and is now close to the major upward trendline. Buyers are expected to lean on the trendline with a defined risk below it to push toward new highs. Sellers, meanwhile, will look for a breakdown to enter for a drop toward the 0.55 handle next.

NZDUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

A minor downward trendline defines the recent pullback toward the major trendline. If the price revisits this downward trendline, sellers are expected to lean on it with a defined risk above it to push toward new lows. Buyers, on the other hand, will seek a breakout to extend the rally toward the key resistance zone around 0.5990 next.

NZDUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

From a risk management perspective, buyers have a better risk-to-reward setup around the major upward trendline, while sellers will want to wait either for a pullback to the minor downward trendline or a break below the major upward trendline.

UPCOMING CATALYSTS

Tomorrow, the US ISM Manufacturing PMI and US Job Openings data are due. On Wednesday, we have the RBNZ rate decision and the US ADP report. Thursday features Fed's Waller, US Jobless Claims, and the US ISM Services PMI. Friday concludes the week with the US NFP report.