New Zealand PM John Key justified the recent kiwi gains at a press conference in Wellington on Monday by citing the country’s economic fundamentals and the recovery in dairy prices but stated that New Zealanders would prefer the NZD “a little bit lower”.

In real effective terms, the commodity driver currency, NZD has recovered two-thirds of its fall from the 2013 peak. Far more, for example than the AUD (which has barely recovered 20%).

And especially, since the end of April 2016 NZDCAD spiked about 11.75% from the lows of 0.8610 to the current 0.9622 levels (observe from the technical charts).

Any further lower oil prices from here onwards or US growth softening (or entering a recession) would disproportionately hurt the CAD.

Kiwis can be scrupulous in gaining against commodity counterpart when crude oil prices would be at their lows, the Canadian dollar would significantly become weaker, but the bounce has lagged the underlying stabilisation in the Canadian outlook.

Consequently, OTM calls strikes of this pair are flashing up with positive numbers to signify the bullish sentiments. So, we think ahead of RBNZ’s monetary policy on Thursday, we reckon it is better to bid OTM calls to get benefitted from the high yield implied volatilities and to participate in the vigorous bull trend.