We know that the extent of damage from last week’s earthquakes, and the economic impact itself, remain highly uncertain, though we are erring towards the higher side, with major questions surrounding the extent of damage in Wellington and Marlborough, let alone Kaikoura. We have shaved our GDP forecasts a touch in Q4 and Q1, offset by a modest lift in mid-2017. 

On Valuation terms: NZD remains overvalued; NZD TWI strength is a major concern, together with downside risks to global growth. But TWI strength is not solely yield driven. Growth matters too and lowers interest rates are stimulating growth.The Canadian dollar offers better value and should continue to benefit from more stable crude oil prices and the US economic recovery.

But the dollar remains in the driver’s seat as global yields rise and the market questions whether this is the beginning of the end for the liquidity trade. While RBNZ shows further easing bias, this is slightly hard to justify.

It’s too early to tell (we are biased to say no) and we view recent movements in the NZD/USD as having largely done their dash, noting NZD resilience on a TWI basis. This is a testament to the wider support factors amidst shaky challenges. The NZD/AUD continues to frustrate those who continue to argue for sustained pushes lower, bouncing each time.

Crude’s stimulus for CAD: Crude oil prices were up by almost 2% on Monday (we’ve seen a sharp gap up opening today) on renewed optimism that OPEC would agree to cut output.

OPEC members are currently negotiating to deliver a planned cut in output to 32.5-33 million barrels a day, so, we could more prospects for crude prices which in turn could act as a positive driving force for oil driven currencies like CAD. Additionally, analysts ponder over RBNZ’s OCR cuts are unjustifiable as Kiwis have been producing steady growth.

Chinese trade exposure: New Zealand has a very export-driven competitive economy with exports accounting for about 30% of GDP.

Most notably, China has been the major trade partner of Kiwis,China overtook the United States at the end of 2008 to become New Zealand's second-largest trading partner, with bilateral trade amounting to $12.7 billion in the year ended September 2011.

Chinese demand for New Zealand commodity exports, especially dairy products, and logs, has risen rapidly in recent times and has been the major factor in the recent surge in New Zealand's commodity prices and terms of trade. 

On data front, we have Canadian GDP & PMIs, Chinese PMIs, Canadian monetary policy, Chinese Trade balance, Chinese industrial production and Kiwis growth numbers are scheduled for next month that could add huge volatility in this pair and we think the current prices of NZDCAD are sensing pressure at stiff resistances of 0.96-97 levels on various fundaments factors, we reckon ongoing upswings could be optimally utilized in order for reducing hedging cost.