AUD/NZD: Sold-off below 1.0500 on SoMP but remains sideways around daily pivot

• AUD/NZD has been sold off on the back of a bearish RBA SoMP that has shown that the central bank has lowered its GDP forecasts substantially. 
• AUD/NZD is currently trading at 1.0490, up from the post-event lows of 1.0482 and down from a high of 1.0538.

The RBA has been under the spotlight for the majority of this week, when the central bank left rates on hold,  1.5%, left its language similar, 'gradual' progress on track, but then surprised markets mid-week on governor Lowe's assessment of the economy which was contrary to the RBA's statement, proposing a neutral stance, which is now seeing markets price in an 80% chance of a rate cut this year. 

Here's the neural dovish stance at the RBA:

• The probability of rate rise or cut more evenly balanced than previously.
• Board does not see a strong case to move rates in the near term.
• Board judges progress on inflation, unemployment can be.
• might lower rates if there was a sustained rise in unemployment, too low inflation.
• Cuts GDP forecasts, see 2.8 pct y/y Dec 2018, 3.0 pct Dec 2019, 2.7 pct Dec 2020, 2.7 pct June 2021.
• Lowers inflation forecasts, trimmed mean at 2.0 pct y/y Dec 2019, 2.1 pct Dec 2020, 2.2 pct June 2021.

We now look ahead to the RBNZ’s first policy decision since 8 November that will also be closely watched. "AUD/NZD was very volatile this week and should remain so, with rate cut chatter on both sides of the Tasman," analysts at Westpac noted. 

AUD/NZD levels

The price has buckled and a few occasions this year so far. The recent low of 1.0398 is on the bear's radar, but first, the 21-D SMA needs to give, guarding a run to the 1.0450s support area. A break there will open prospects for a sustained trend to the downside, in the extension of last year's summer supply. However, should the RBNZ be equally as neutral, the pair is likely to remain in a sideways channel with an upside target of 1.0550 ahead of 1.0670 YTD highs.