NZD/USD pulls back on hawkish Warsh; focus turns to RBNZ decision

FUNDAMENTAL OVERVIEW USD:The US dollar strengthened across the board on Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium. The key passage was him saying "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.This process has, of course, extended the corrections in the "debasement" trades, with the US dollar returning to pre-US Treasury announcement levels. The rate hike probabilities for the September meeting have also increased, with the market now seeing a 60% chance of a hike. Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% and deter the Fed from hiking at the upcoming meeting. If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message.  NZD:On the NZD side, the RBNZ is widely expected to raise the OCR by 25 bps, bringing it to 2.75%. In its latest projections, the central bank signalled that the OCR could be increased to 3.00% by year-end and then remain there for the rest of 2027. The market pricing is in line with the RBNZ projections for 2026, but not for 2027 where it sees two more rate hikes to come. For this reason, there’s a downside risk for the kiwi in case the RBNZ fails to match or outhawk the market. The focus will be on the updated macroeconomic projections and signals about the future policy path. NZDUSD TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that the NZDUSD pair has been in a textbook uptrend with clean swing highs and swing lows. The price pulled back from a key resistance zone around the 0.5990 level and it’s now near the major upward trendline. The buyers will likely lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break to pile in for a drop into the 0.55 handle next.NZDUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we have a minor downward trendline defining the recent pullback into the major trendline. If the price comes back into the downward trendline, we can expect the sellers to lean on it with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will look for a break to extend the rally into the key resistance zone around the 0.5990 level next.NZDUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, there’s not much we can add here as from a risk management perspective, the buyers will have a better risk to reward setup around the major upward trendline, while the sellers will want to wait either for a pullback into the minor downward trendline or a break below the major upward one. The red lines define the average daily range for today. UPCOMING CATALYSTSTomorrow, we have the US ISM Manufacturing PMI and the US Job Openings data. On Wednesday, we have the RBNZ rate decision and US ADP report. On Thursday, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report. This article was written by Giuseppe Dellamotta at investinglive.com.