On Wednesday, the US Dollar (USD) surged against major currencies, notably the Swiss Franc (CHF) and New Zealand Dollar (NZD), as markets reacted to heightened geopolitical tensions and increased expectations of Federal Reserve (Fed) tightening. The USD/CHF pair climbed above 0.8150 for the first time since late July, with the Swiss Franc nearly 0.9% down over the past two days, driven by risk aversion following US military strikes on Islamic Revolutionary Guard Corps (IRGC) targets in Iran and retaliatory attacks on US bases in Bahrain and Jordan [1][3]. The Swiss National Bank (SNB) is expected to keep its benchmark rate at 0% on September 24, contrasting with the Fed's hawkish outlook [1]. Technical indicators show USD/CHF in overbought territory, suggesting possible consolidation or correction, with upside targets at 0.8175 and 0.8207, and support at 0.8070 [1].
Meanwhile, the New Zealand Dollar (NZD) plunged 1.45% against the USD, trading around 0.5810, despite the Reserve Bank of New Zealand (RBNZ) raising its Official Cash Rate (OCR) by 25 basis points to 2.75%. The decline was attributed to the RBNZ's cautious guidance, emphasizing gradual stimulus removal and data-dependent future decisions. Governor Anna Breman noted the OCR trajectory aligns with previous projections and highlighted the need for more time to assess the monetary stance's impact [2]. Technical analysis shows NZD/USD in bearish territory, with resistance at 0.5820 and support at 0.5800 and 0.5760 [2].
Gold (XAU/USD) also faced downward pressure, testing support around $4,300 and dropping 3.25% for the week. The bearish trend was reinforced by Fed Chairman Kevin Warsh's hawkish comments at the Jackson Hole summit, stating the central bank has "work to do" to reach its 2% inflation target [3]. The escalation in US-Iran tensions further boosted the USD's safe-haven appeal, contributing to gold's decline. Technical indicators for gold show strong downside momentum, with MACD at -30.53 and RSI below 50. A break below $4,300 could open the path to $4,225 and $4,000, while resistance lies at $4,450 and $4,530 [3].
Market participants are now focused on the upcoming US employment report, with economists expecting 58K jobs added in August and the unemployment rate steady at 4.1%. Stronger data could reinforce Fed tightening expectations and further support the USD, while weaker figures may limit its strength and provide relief to currencies like the NZD [2].
CONCLUSION
The US Dollar's strength, fueled by Fed rate hike expectations and geopolitical tensions, has led to notable declines in the Swiss Franc, New Zealand Dollar, and gold prices. Technical indicators suggest potential for further volatility, with market attention shifting to upcoming US employment data for additional direction. Overall, sentiment remains positive for the USD, with high market impact across currencies and commodities.