Key Points
- Fed Chair Warsh used his Jackson Hole debut on Friday to call inflation concerning and warn that summer readings do not show underlying trends have meaningfully improved, a hawkish surprise that caught markets leaning the other way. Stocks held steady, but the bond market moved to price in hike risk, and the dollar caught a broad bid into the weekend. This week brings the follow through: US ISM Manufacturing on Tuesday, the RBNZ and Bank of Canada rate decisions on Wednesday, and Non-Farm Payrolls on Friday, the first major US jobs print since the shock minus 911,000 benchmark revision.
- Gold sits at $4,432.48 on the H4 chart after a sharp reversal from the $4,700 area, where a bearish change of character confirmed the shift once Warsh’s tone became clear. Price is now testing the demand zone that underpinned the entire August rally. A hold here keeps the broader bullish structure intact, while a break lower would open a deeper pullback toward the $4,300 zone ahead of Friday’s payrolls print.
- NZD/USD has fallen to 0.5916 after rejecting the 0.6000 strong high, with the pair now sitting just above a demand zone that formed during August’s rally. Wednesday’s RBNZ decision is the pivotal event, with a hike from 2.50% to 2.75% currently expected. A hawkish surprise could spark a sharp recovery, while a smaller move or a pause would likely extend the current slide.
Last Week in Review
Jackson Hole delivered the surprise markets were not fully positioned for. Fed Chair Kevin Warsh, in his first major address since taking the chair, said inflation remains too high and that better-than-expected summer readings do not tell him underlying trends have meaningfully improved. He notably avoided giving forward guidance or a clear reaction function, instead framing his approach around a return to a Fed that gives markets less certainty, a deliberate echo of the pre financial crisis era. US equities took the news in stride, with the S&P 500 gaining 0.77% and the Nasdaq 1.41% over the five day window, but the bond market told a different story, building in fresh expectations for further hikes rather than the cuts many had been positioning for.
The dollar was the biggest beneficiary. That broad bid hit precious metals hard, with gold reversing sharply from its highs near $4,700 down to $4,432 by the end of the week, and it pressured currencies with dovish central bank expectations priced in, including the New Zealand dollar, which fell from its own highs near 0.6000 to 0.5916. European equities were the standout performer regardless, with the DAX up 1.77% over the week as broader risk appetite held firm despite the hawkish tone from Washington.
Gold (XAU/USD): Testing the August Rally’s Foundation
Chart: XAU/USD, H4 timeframe (TradingView, SMC)
The H4 chart shows just how sharply sentiment turned. Gold spent most of August in a clean uptrend, breaking through consecutive supply zones from the $4,000 strong low all the way to a weak high near $4,700. That structure held right up until Friday, when a bearish change of character confirmed the reversal and price fell to $4,432 in a matter of sessions, wiping out roughly two weeks of gains.
Price is now sitting directly on top of the demand zone between $4,300 and $4,380 that underpinned the rally’s earlier legs, an area where buyers stepped in repeatedly through mid August. This is the first genuine test of whether the broader bullish structure survives Warsh’s hawkish debut. A hold here, followed by a bullish change of character, would suggest the pullback is a correction within an intact uptrend. A clean break below $4,300 would be a more serious signal, opening the door to a deeper retracement toward the strong low near $4,000.
Friday’s Non-Farm Payrolls print is the key event standing between gold and its next directional move. A strong labour market reading would reinforce Warsh’s hawkish framing and add further pressure on gold, while a weak print, particularly if it echoes the shock benchmark revision from earlier this month, would reopen the case for rate cuts and could fuel a sharp recovery back toward the $4,600 area.
NZD/USD: RBNZ Decision Looms After the Rejection
Chart: NZD/USD, H4 timeframe (TradingView, SMC)
NZD/USD tells a similar story to gold, just on a currency pair basis. The H4 chart shows a strong rally through most of August, with consecutive breaks of structure carrying price from the low 0.580s to a strong high just below 0.6000. That level rejected cleanly, a bearish change of character confirmed the shift, and price has since fallen to 0.5916, now sitting just above a demand zone that formed during the earlier stages of the rally.
Wednesday’s RBNZ decision is the single biggest catalyst for this pair all week. The market currently expects a hike from 2.50% to 2.75%, which would be one of the more aggressive moves from a G10 central bank this year. If the RBNZ delivers on that expectation and signals further tightening, it would work directly against the broader US dollar strength that has driven the pair lower since Friday, potentially sparking a sharp recovery back toward 0.5950 and the broken 0.6000 level. A smaller hike, a pause, or cautious forward guidance would likely see the pair extend its slide toward the deeper demand zone near 0.5850.
With both the RBNZ and Bank of Canada decisions landing on the same day, and Non-Farm Payrolls following just two days later, this is a pair where the data calendar rather than the charts alone will likely decide the next major move.
Key Events This Week
Tuesday 1 September US ISM Manufacturing PMI
Forecast at 55.2, a modest cooling from the prior 55.6. As the first major US data release since Warsh’s Jackson Hole address, a hotter than expected print would reinforce the hawkish narrative and could extend the dollar’s strength into the RBNZ and payrolls releases later in the week.
Wednesday 2 September RBNZ Official Cash Rate Decision
A hike from 2.50% to 2.75% is currently priced in. This is the pivotal event for NZD/USD, with the accompanying monetary policy statement and press conference likely to matter more than the headline decision itself for determining whether the pair can recover its recent losses.
Wednesday 2 September Bank of Canada Rate Decision
The BOC is expected to hold at 2.25%. Alongside the RBNZ decision landing the same day, this makes Wednesday one of the busiest central bank sessions of the month, with knock on effects likely for broader risk sentiment and the US dollar.
Friday 4 September US Non-Farm Payrolls
Forecast at 58,000 jobs added, a rebound from the prior negative 23,000 reading. Unemployment is expected to hold at 4.1% and Average Hourly Earnings at 0.3%. This is the first major payrolls release since the shock minus 911,000 benchmark revision earlier this month, and will be read as a direct test of Warsh’s hawkish framing at Jackson Hole. A strong print would support the dollar and pressure gold, while a weak print could trigger a sharp reversal across both of this week’s setups.
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