Week 35 of 2026: Warsh Brought Rate Hikes Back: Gold -3%, USD/JPY at 160 - What Happens Monday?

Another eventful trading week ended with global financial markets reassessing the outlook for U.S. interest rates. What initially looked like a technology-driven rally fueled by Nvidia's strong earnings eventually became a much broader monetary-policy story.

On Thursday, enthusiasm surrounding artificial intelligence helped push the Nasdaq higher. By Friday, however, attention had shifted toward the Federal Reserve after Kevin Warsh's first Jackson Hole speech revived expectations of another interest-rate increase.

The reaction spread quickly across asset classes. The U.S. dollar strengthened, short-term Treasury yields moved higher, gold experienced a sharp selloff, and USD/JPY climbed back above the psychologically important 160 level despite Japan's substantial recent currency-market intervention.

Meanwhile, GBP/JPY remained surprisingly stable, EUR/USD ended its four-week winning streak, and oil prices declined as traders evaluated the possibility of diplomatic progress involving Iran and the Strait of Hormuz.

The central theme of the week was not the performance of any individual asset. It was how rapidly changing Federal Reserve expectations influenced currencies, equities, commodities, and global risk sentiment.

In this weekly Forex market analysis, we examine the major developments, important technical levels, and possible scenarios for the following Monday and the upcoming trading week. The figures and outlooks reflect the market snapshot covered in this report rather than live prices or current trading signals.

The Federal Reserve Changed the Market Narrative Again

The week already had a relatively hawkish monetary-policy foundation before the Jackson Hole speech.

July's Personal Consumption Expenditures (PCE) inflation report showed prices increasing by 0.2% month over month, while annual core PCE inflation remained at 3.3%.

That meant inflation had stayed above the Federal Reserve's 2% target for 65 consecutive months. Following the report, market pricing suggested approximately a 40% probability of a September interest-rate increase.

These figures kept the possibility of further monetary tightening firmly in focus. Although inflation was not accelerating dramatically on a monthly basis, the persistent annual core reading made it difficult for investors to assume that the Federal Reserve's inflation problem had been fully resolved.

Kevin Warsh's Jackson Hole Speech Triggered Another Repricing

The decisive development came on Friday.

Speaking at Jackson Hole, Kevin Warsh indicated that if the Federal Reserve lacked sufficient confidence that inflation was returning toward 2% at an appropriate pace, additional monetary-policy action might still be necessary.

Financial markets interpreted the message as hawkish.

Immediately before the speech, traders were assigning roughly a 35% probability to a September rate increase of at least 25 basis points. Following the remarks, that probability rose to approximately 57-58%.

That was a substantial repricing within a very short period.

The U.S. Dollar Index gained approximately 0.6%, while short-term Treasury yields also moved higher. Higher expected interest rates supported demand for the dollar and increased pressure on assets sensitive to financing costs.

For Forex traders, the message was especially important: the expected path of U.S. monetary policy had become more restrictive, increasing the dollar's relative yield appeal.

For equity investors, particularly those holding highly valued technology companies, the same development introduced additional concerns about valuation and financing conditions.

For gold, which does not generate interest income, the shift created an unfavorable combination of rising yields and a stronger dollar.

USD/JPY: Back Above 160 Despite Record Japanese Intervention

USD/JPY was one of the most interesting currency pairs of the week because it returned to an area that is both psychologically important and politically sensitive.

By Friday evening, the pair was trading around 160.15, representing approximately a 0.5% daily gain for the U.S. dollar.

Compared with the previous week's closing level near 159, USD/JPY had advanced approximately 0.7% over the week.

The renewed dollar strength was particularly significant given the extraordinary scale of Japan's recent currency-market intervention.

Japan's 15.4 Trillion Yen Intervention Did Not Permanently Reverse the Trend

Japan's Ministry of Finance reported intervention spending of approximately 15.4 trillion yen, equivalent to roughly $96.5 billion, between July 30 and August 26.

According to the figures covered in this analysis, that represented a record intervention amount.

Yet despite the scale of those operations, USD/JPY returned to the 160 region.

This demonstrates an important limitation of currency intervention. Official yen buying can produce substantial short-term exchange-rate movements, but it does not automatically eliminate the economic conditions supporting the original trend.

One of those conditions is the interest-rate differential between the United States and Japan.

When the yen remains a relatively inexpensive funding currency compared with higher-yielding alternatives, carry-trade demand can continue to encourage Short JPY positioning.

However, that relationship is not risk-free. Intervention can create sudden and substantial yen appreciation, especially when many leveraged traders hold similar positions.

Bank of Japan Tightening Expectations Are Increasing

There is another force pulling USD/JPY in the opposite direction.

Tokyo core inflation accelerated again in August, and the market was assigning approximately a 65% probability to a September Bank of Japan interest-rate increase.

This creates two competing monetary-policy influences:

• Higher U.S. interest-rate expectations: These can support the dollar and preserve an attractive relative yield advantage.
• Japanese monetary tightening expectations: These can support the yen by narrowing the expected interest-rate differential.
• Currency intervention risk: Additional official yen buying could create sudden downward pressure on USD/JPY.

The upcoming G20 finance ministers' meeting adds another source of potential headlines. Japan's finance minister and Bank of Japan Governor Kazuo Ueda are expected to attend, with yen weakness likely to remain an important topic.

USD/JPY Monday Outlook: Neutral to Mildly Bullish Above 160

The technical picture remains neutral to mildly bullish while USD/JPY holds above the 160 level.

However, the 160-161 region presents an unusual combination of upside momentum and elevated intervention-related headline risk. A position that appears attractive from an interest-rate perspective can quickly become vulnerable if Japanese authorities signal or initiate additional action.

If USD/JPY moves below 159.50, the short-term picture could weaken, bringing 159.00 and then 158.50 back into focus.

The key question is whether renewed expectations of Federal Reserve tightening can continue supporting the dollar without triggering a stronger response from Japanese policymakers.

GBP/JPY: A Quiet Week With Important Breakout Levels

While USD/JPY experienced renewed upward pressure, GBP/JPY was comparatively calm.

The British pound was trading around 1.3528 against the U.S. dollar on Friday, heading toward a weekly decline of approximately 0.4%.

That ended a four-week winning streak for sterling.

Part of the weakness reflected reduced expectations for additional Bank of England rate increases.

Bank of England Governor Andrew Bailey indicated that the second-round inflationary effects of higher energy prices remained relatively contained, partly because of weakness in the U.K. labor market.

Those comments reduced the perceived urgency for another rapid increase in British interest rates.

However, the Japanese yen also weakened over the week. As a result, the pound's weakness against the dollar was largely offset by yen depreciation.

GBP/JPY finished around 216.60-216.70, leaving the pair almost unchanged on a weekly basis.

GBP/JPY Monday Outlook: Neutral Between 216 and 217

The near-term outlook remains neutral.

A sustained move above 217 could create a more constructive technical picture and increase the possibility of further upside.

Conversely, a break below 216 would make a correction toward 215 more plausible.

However, technical levels should not be considered independently of yen-related developments. If Japanese intervention risk increases significantly, GBP/JPY could experience a sharp reversal even without a major new development in the British economy.

For this pair, the yen side may become the dominant driver of short-term risk.

EUR/USD: The Four-Week Rally Comes to an End

EUR/USD also experienced a notable reversal, ending its four-week winning streak as the dollar strengthened following the Jackson Hole speech.

On Friday, the pair declined toward 1.1582, with an intraday low around 1.1577.

That left the euro approximately 0.8% lower for the week.

The immediate catalyst was the Federal Reserve rather than a sudden deterioration in eurozone economic conditions.

As traders increased the probability assigned to a September U.S. rate hike, the dollar became more attractive relative to the euro, pushing EUR/USD lower.

Eurozone Inflation Could Bring the ECB Back Into Focus

Although Friday's decline was primarily driven by U.S. monetary-policy expectations, European inflation is also becoming increasingly relevant.

Higher energy prices and continuing geopolitical uncertainty have created renewed inflation concerns.

The upcoming eurozone inflation report is expected to show annual price growth of approximately 3.3%.

If the reading exceeds expectations, traders could begin reassessing the possibility of further European Central Bank tightening.

That would create a competing monetary-policy influence against the current dollar-driven trend.

EUR/USD Monday Outlook: Mildly Bearish

The short-term outlook is mildly bearish following Friday's dollar strength.

The immediate area to monitor is around 1.1570-1.1580. Sustained weakness through that region would bring 1.1550 and potentially 1.1500 into focus as downside levels.

However, if Friday's dollar rally begins to reverse and EUR/USD moves back above 1.1600, the technical picture could return toward neutral relatively quickly.

The most important question at the start of the next session is whether investors continue to price a more hawkish Federal Reserve or begin taking profits on the dollar's sharp advance.

Nasdaq: Nvidia's Earnings Rally Meets Renewed Interest-Rate Pressure

The Nasdaq experienced a particularly interesting week because two powerful market narratives collided within just 24 hours.

On Thursday, Nvidia's earnings and outlook gave investors renewed confidence in the strength of artificial intelligence-related demand.

The company projected approximately 70% revenue growth for the coming year, comfortably exceeding market expectations in the report covered here.

Nvidia shares surged 8.7%, helping the Nasdaq rise 1.57% and close above 26,541.

For a moment, the results appeared capable of reigniting the broader technology rally.

Friday's Fed Repricing Reversed the Mood

The following day, attention shifted from corporate earnings to monetary policy.

After Kevin Warsh's Jackson Hole speech revived expectations of another Federal Reserve rate increase, the Nasdaq declined 0.52% and closed at 26,402.42.

Nvidia also reversed part of Thursday's advance, giving back approximately 4.6% in Friday's trading.

Despite the late-week selloff, the Nasdaq still finished the week approximately 0.85% higher.

The contrast between Thursday and Friday illustrates how even exceptional corporate news can be challenged by changes in the expected cost of money.

Higher interest rates can place particular pressure on growth-oriented companies because investors discount expected future earnings using rates that are sensitive to broader financing conditions.

Weak Market Breadth Adds a Warning Signal

There was also a less visible concern underneath the headline index performance.

On Friday, more than twice as many Nasdaq-listed stocks declined as advanced.

That means weakness was relatively widespread, even though the headline index's decline appeared manageable.

When a major index is supported by a relatively small group of large companies while many other stocks fall, the underlying market structure may be less resilient than the index level alone suggests.

Nasdaq Monday Outlook: Neutral to Mildly Bullish

The near-term outlook remains neutral to mildly bullish.

Nvidia's strong earnings narrative continues to provide support for technology sentiment, but higher interest-rate expectations have become a significant headwind.

The next trading session will help reveal whether investors are more influenced by the positive AI growth outlook or by the possibility that U.S. monetary policy will remain restrictive for longer.

Gold: A Dramatic Reversal From $4,696 Toward $4,567

Gold experienced one of the most significant reversals of the week.

Earlier in the period, the precious metal climbed above $4,696 per ounce, reaching its highest level in more than three months.

That strength was quickly challenged as the market reassessed the Federal Reserve's likely next move.

On Friday, spot gold declined toward approximately $4,567, representing a daily loss of nearly 3%.

December U.S. gold futures settled approximately 2.9% lower at $4,529.90.

Following Friday's decline, gold was also down approximately 2.9% for the week.

Why Higher Rate Expectations Pressure Gold

Gold does not generate interest income. That makes its relative attractiveness sensitive to changes in the yields available from competing financial assets.

When investors expect higher U.S. interest rates, yield-bearing assets may become more attractive relative to holding physical gold.

The stronger dollar created an additional source of pressure on Friday.

Because gold is commonly quoted in U.S. dollars, changes in the dollar's value can influence international demand and the price investors are willing to pay.

The combination of rising yields and a stronger dollar therefore created a difficult environment for the precious metal.

Gold Monday Outlook: Bearish to Neutral

After a decline of nearly 3% in one session, a short-term technical rebound would not be unusual.

However, Friday's selloff clearly weakened the immediate technical structure.

The $4,550 area is an important downside reference. If that region fails to hold, attention could shift toward approximately $4,500.

On the upside, a recovery above $4,600 could suggest that Friday's reaction was partly excessive and that buyers are beginning to regain control.

Below $4,600, the short-term outlook remains considerably more vulnerable than it was earlier in the week.

The next major influence will likely be whether Federal Reserve rate-hike expectations continue rising or begin reversing after Friday's sharp adjustment.

Iran, the Strait of Hormuz and Falling Oil Prices

Geopolitical developments remained important throughout the week, particularly those involving Iran and the Strait of Hormuz.

However, the market's interpretation of the situation became somewhat less pessimistic as traders considered the possibility of diplomatic progress.

Oil prices declined on Friday and lost more than 4% over the week amid speculation that improved diplomacy could eventually help reopen the Strait of Hormuz.

Brent crude finished around $89.31 per barrel, while West Texas Intermediate closed near $83.40.

Why Oil Prices Matter Beyond Energy Markets

The direction of oil prices can influence several financial markets simultaneously.

If geopolitical tensions ease and energy supply conditions improve, oil prices could decline further. Lower energy costs could eventually reduce some inflationary pressure, potentially affecting expectations for future central-bank policy.

A reduction in geopolitical uncertainty might also weaken certain forms of safe-haven demand for gold while improving broader investor risk sentiment.

The potential effects form an interconnected chain:

• Diplomatic progress may reduce perceived energy-supply disruption risk.
• Lower oil prices could ease some inflationary pressures.
• Reduced inflation pressure could make additional monetary tightening less necessary.
• Changes in interest-rate expectations could influence currencies, bonds and equities.
• Lower geopolitical uncertainty could also affect demand for safe-haven assets such as gold.

None of these outcomes is guaranteed. Oil prices can react to other supply and demand factors, while central banks consider much more than energy costs alone.

The situation remains highly uncertain, and a single unexpected geopolitical announcement over the weekend could invalidate the market's assumptions before the following Monday session begins.

Monday Market Outlook: Key Levels and Directional Bias

The following table summarizes the short-term scenarios identified in this weekly analysis. These are conditional market observations based on the prices and information available at the end of the period covered.

These scenarios depend heavily on news developments and whether Friday's monetary-policy repricing continues into the following week.

A strong technical level can lose relevance quickly when unexpected economic or geopolitical information changes the broader market environment.

Weekend Risk: Why Monday Could Open Very Differently

Several important uncertainties remain unresolved heading into the weekend.

The first concerns Japan. USD/JPY is once again trading near 160, an area associated with substantial intervention concerns.

Unexpected comments from Japanese officials or fresh currency-market intervention could trigger rapid yen strengthening before traders have an opportunity to react during normal market hours.

The second concerns Iran and the Strait of Hormuz. Diplomatic developments could alter expectations for energy supply, oil prices, inflation and broader market sentiment.

These risks become particularly important for leveraged positions held over the weekend because the following market open may differ significantly from Friday's closing prices.

Orders designed to limit losses do not necessarily guarantee execution at a specific price if markets reopen with a gap or available liquidity changes sharply.

A market position that looks manageable on Friday evening can have a very different risk profile after an unexpected Sunday announcement.

What Could Move Forex and Financial Markets Next Week?

Several upcoming events could significantly influence the market's next direction.

G20 Finance Ministers' Meeting

The meeting may attract attention because of Japan's weak currency and the possibility of further official action.

Any comments from Japanese policymakers regarding exchange-rate volatility or intervention could influence yen crosses, particularly USD/JPY and GBP/JPY.

Eurozone Inflation Report

With annual eurozone inflation expected around 3.3% in the analysis, an upside surprise could revive expectations of further European Central Bank tightening.

That could provide support for EUR/USD if the European monetary-policy outlook becomes more restrictive relative to the U.S. outlook.

U.S. Non-Farm Payrolls and the Labor Market

The next U.S. employment report is another major event.

The market consensus referenced in this analysis expects approximately 45,000 new jobs in August, following an unexpected employment decline in July.

A significantly stronger report could reinforce expectations that the Federal Reserve has room to remain hawkish.

A weaker report could complicate the outlook by suggesting that labor-market conditions are deteriorating despite persistent inflation pressure.

Either outcome could change the probabilities assigned to the next Federal Reserve decision.

Further Federal Reserve Repricing

After Friday's sharp shift in expectations, traders will be watching whether the market continues assigning greater probability to a September rate increase.

Changes in those probabilities could influence Treasury yields, the dollar, gold, and technology shares simultaneously.

The central question is whether Friday's reaction represents the beginning of a sustained adjustment or a temporary overshoot that partially reverses during the following sessions.

The Bigger Lesson: Interest Rates Connect Different Markets

Thursday and Friday provided a useful example of how quickly investors can change their priorities.

On Thursday, Nvidia's earnings seemed capable of restarting a broad technology rally. Investors focused on the strength of artificial intelligence demand, future revenue growth, and corporate profitability.

Twenty-four hours later, a Federal Reserve speech changed the broader narrative.

The dollar strengthened, gold fell sharply, Treasury yields moved higher, and technology shares encountered renewed pressure.

This happened because interest rates influence financial markets through several different mechanisms.

Currency Markets and Relative Yield

Exchange rates are influenced partly by the expected returns available from assets denominated in different currencies.

If U.S. interest-rate expectations rise relative to those of another economy, the dollar may become more attractive to investors seeking yield. That can support USD/JPY while placing downward pressure on EUR/USD.

Technology Stocks and Valuations

Higher interest rates can increase the discount rate applied to expected future corporate earnings. This can create pressure on highly valued growth companies, even when their reported earnings remain strong.

Gold and the Opportunity Cost of Holding a Non-Yielding Asset

Gold does not generate interest income. When Treasury yields increase, the opportunity cost of holding gold can rise, especially if the U.S. dollar strengthens at the same time.

Energy Prices and Inflation Expectations

Oil prices influence inflation expectations and the outlook for economic growth. Significant changes in energy markets can therefore affect the monetary-policy assumptions driving currencies, bonds, equities, and precious metals.

The most important lesson is that different charts can respond to the same macroeconomic development for different reasons.

Understanding those connections can be more useful than analyzing every currency pair or asset class as though it moves independently.

Why These Market Relationships Matter at SignalCrumbs

At SignalCrumbs, we follow developments involving interest rates, currency trends, volatility, and broader market conditions because they can influence the environment in which our own automated Forex trading system operates.

Carry-trade dynamics are particularly relevant when changing central-bank expectations alter the relative attractiveness of holding one currency against another.

For example, a more hawkish Federal Reserve can support the dollar against the yen, while expectations of Bank of Japan tightening or currency intervention can introduce substantial risk in the opposite direction.

Those forces can coexist, making the trading environment more complicated than a single bullish or bearish chart pattern might suggest.

Our approach also recognizes that market conditions can change quickly. A strategy needs to consider not only potential opportunities but also volatility, portfolio exposure, margin requirements, and whether existing risk limits justify opening additional positions.

Automation can help apply predefined rules consistently, but it does not eliminate unexpected market movements or guarantee favorable outcomes.

At SignalCrumbs.com, we share educational Forex market analysis and provide insight into the activity of our own proprietary automated trading system, including positions opened and closed under its trading logic.

The purpose is to examine how systematic trading decisions interact with changing economic environments rather than assume that any one prediction or market scenario must occur.

Final Thoughts

The trading week ended with several important questions still unresolved.

USD/JPY returned above 160 despite Japan's record intervention spending, creating a difficult combination of dollar strength, carry-trade demand, Bank of Japan tightening expectations, and renewed intervention risk.

GBP/JPY remained comparatively stable as sterling weakness and yen depreciation largely offset each other. EUR/USD ended its four-week advance as the Federal Reserve's increasingly hawkish outlook supported the dollar.

The Nasdaq demonstrated the power of two competing narratives. Nvidia's exceptional earnings and growth outlook supported technology shares on Thursday, but renewed rate-hike concerns reversed part of that optimism on Friday.

Gold experienced an even sharper reaction, falling nearly 3% in one session as the dollar strengthened and short-term Treasury yields moved higher.

Meanwhile, developments around Iran and the Strait of Hormuz influenced oil prices and created another important source of uncertainty surrounding inflation and global risk sentiment.

Heading into the next trading week, several questions deserve close attention. Can USD/JPY remain above 160 without provoking another intervention threat? Will Friday's dollar strength continue, or will the market partially reverse its reaction to Jackson Hole?

Can Nvidia maintain support for the Nasdaq despite higher interest-rate expectations? And will gold's sharp selloff develop into a larger correction or produce a technical rebound?

Upcoming eurozone inflation data, the U.S. labor-market report, the G20 meeting, and further changes in Federal Reserve expectations could all influence the answers.

For traders holding leveraged positions, the weekend itself introduces additional risk. A major geopolitical announcement or unexpected policy statement could significantly change the market environment before the next session begins.

The biggest lesson from this week is that market narratives can change extremely quickly. Sometimes one monetary-policy speech is enough to reshape the outlook for currencies, equities, bonds, and gold at the same time.

That is why it is not enough to know that a company reported strong earnings or that a currency pair crossed a technical level. The expected cost of money, the direction of monetary policy, and the broader market environment can be equally important.

For systematic traders, the objective should not be predicting every reaction perfectly. It should be understanding the risks, monitoring changing conditions, and applying a strategy whose exposure and position management remain consistent with its predefined rules.

Market forecasts are conditional, not guarantees. The next significant headline could invalidate the scenarios discussed here before Monday's opening session.