NZD/USD renews six-week low above 0.6100 on hawkish Fed at Jackson Hole, US NFP eyed

• NZD/USD extends Friday’s losses towards refreshing a multi-day low.
• US dollar cheers Fed Chair Powell’s hawkish bias, doubts over central banks ability to tame recession.
• Escalating Sino-American tussles, RBNZ’s cautious mood appears to exert more downside pressure.
• No major data from New Zealand this week, US jobs report will be crucial for clear directions.

NZD/USD drops to the fresh low in six weeks, taking offers to 0.6125 during Monday’s Initial session, as risk-aversion underpins the US dollar’s safe-haven demand. Also exerting downside pressure on the Kiwi pair is the recent shift in the Reserve Bank of New Zealand’s (RBNZ) tone, despite favoring further rate hikes, as well as the US-China tension.

“Restoring price stability will take some time, require using central bank's tools 'forcefully',” said Fed Chairman Jerome Powell during his much-awaited Jackson Hole speech on Friday. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'.

RBNZ Governor Adrian Orr, on the other hand, spoke earlier at the Jackson Hole and mentioned that we think there will be at least another two rate hikes. The policymaker also said, “Our core view is we won't see a technical recession.” However, his comments like, “Central banks may need to push towards zero growth,” seemed to have weighed on the NZD/USD prices.

It’s worth noting that the concerns over the global central bankers’ ability to tame inflation, as well as increasing the odds of the recession, joined fears of more US-China tussles to also favor the US dollar’s demand.

US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession. On the same line was a study presented at the Jackson Hole Symposium stating that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

Elsewhere, China's military said on Sunday, per Reuters, that it was monitoring US Navy vessels sailing through the Taiwan Strait, maintaining a high alert and ready to defeat any provocations.

It should be noted that the mixed US data couldn’t derail the NZD/USD downside. That said, US Core Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s preferred inflation gauge, edged lower to 4.6% in July from 4.8% prior and 4.7% market forecasts. Further, the University of Michigan Consumers Confidence Index was revised upwards in August, with the final print arriving at 58.2, versus the preliminary reading of 55.1 and 55.2 expected.

Against this backdrop, Wall Street benchmarks dropped more than 3.0% each while the US 10-year Treasury yields printed mild gains to end the week around 3.04%.

To sum up, NZD/USD bears are in control and can keep reins ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

The NZD/USD pair’s sustained downside break of monthly horizontal support, now resistance around 0.6155-50, directs the pair sellers towards the 0.6100 threshold ahead of highlighting the yearly bottom surrounding 0.6020.