NZD/USD - BUY SET UP AS INTEREST RATES IN NEW ZEALAND RISE

We are highly likely to see a strong recovery in the New Zealand Dollar Against the U.S Dollar as interest rates in New Zealand continue to rise.

Markets expect the Reserve Bank of New Zealand to raise the cash rate to 3.50% by year-end, which will be a premium 0.75% to 1.00% Interest rate over the U.S.

This means any investors holding short positions in NZD/USD will lose money holding the position open overnight.

The U.S Dollar has been strong in recent weeks as stock markets have fallen due to the Federal Reserves' commitment to raising interest rates aggressively to contain inflation running at 8.30%. When stock markets fall globally, investors historically sell international currencies and flood into the safety of the U.S Dollar, as its the worlds reserve currency.

However, when stocks recover as they always do, investors will quickly sell dollars and move back into international currencies as they invest globally in equities again, causing the dollar to weaken in exchange rates and push up NZD/USD.