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Daily Pivots: (S1) 143.53; (P) 144.45; (R1) 145.05; More...

Intraday bias in GBP/JPY remains on the downside with focus on 143.72 key support. Decisive break there will be a strong sign of bearish reversal. That is, whole rebound from 131.51 has completed. Deeper fall should then be seen to 141.00 key support for confirmation. On the upside, above 144.80 minor resistance will turn intraday bias neutral first.

In the bigger picture, focus is staying on 149.98 key resistance. Decisive break there should confirm that medium term fall from 156.59 (2018 high) has completed at 131.51 already. Rise from 131.51 is then seen as the third leg of the corrective pattern from 122.36 (2016 low). GBP/JPY should then target 156.59 and above. However, rejection by 149.98 will retain medium term bearishness and could extend the fall from 156.59 through 131.51 to 122.36.

Daily Pivots: (S1) 122.91; (P) 123.58; (R1) 124.08; More...

EUR/JPY's break of 123.39 key support now suggests that whole rise from 118.62 has completed at 127.50 already. Intraday bias remains on the downside for further decline. Sustained trading below 123.39 will confirm and pave the way to retest 118.62 low. On the upside, break of 124.29 resistance is needed to be the first sign of short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, current development argues that rebound from 118.62 is merely a correction and has completed at 127.50. EUR/JPY is staying in long term falling channel from 137.49 (2018 high). Decisive break of 118.62 will confirm resumption of this medium term fall and target 109.20 low. For now, this will be the favored case as long as 125.23 resistance holds.

• The RBNZ reduced the OCR to 1.5%.
• The RBNZ still has an easing bias. Whether another OCR occurs will depend on the data.
• We think the probability of another OCR cut in June or August is low. There is more risk of another cut in late 2019.
• Today's OCR cut will cause mortgage rates to fall even further.
• We expect house price inflation to accelerate to 7% p.a. by mid-2020 due to low mortgage rates and the cancellation of capital gains tax

The Reserve Bank today reduced the OCR to a new record low of 1.5%.

The RBNZ's rationale for cutting the OCR was very much in line with what we expected. Inflation is currently a little below the 2% mid-point of the target range. The RBNZ was previously relying on a pickup in the domestic economy to ensure that inflation returns to target. But that simply has not happened – the economy has slowed instead of accelerating. On top of that, the RBNZ is concerned about a downturn in the global economy.

We more or less agree with the RBNZ's reasoning – there was more danger of inflation undershooting 2% than there was of inflation spiralling above 2%.

Where to next?

The RBNZ's communications today indicate that it is not currently planning a follow-up OCR cut, but it is open to the idea if required by the data:

The press release consisted of a justification for cutting the OCR today – there was nothing at all in the press release to indicate what the RBNZ is thinking about future OCR moves.

The RBNZ's OCR forecast fell to 1.36% by mid-2020. That implies roughly a 50% chance of a second OCR cut over the coming year.

The record of the Monetary Policy Committee meeting showed that the committee thought that cutting the OCR now would “establish a more balanced outlook for interest rates.” In other words, once the OCR was reduced to 1.5%, it was not clear whether a further OCR reduction would be required or not.

During the press conference the Governor reiterated the balanced outlook and said, “we are now in a position to absorb the data.”

Our interpretation of all this is that a further OCR reduction would require the RBNZ to be surprised on the downside by economic developments – even if only a little.

But the RBNZ is already braced for weak data. As it happens, the RBNZ's near-term forecasts are very much in line with our own. It expects GDP growth to remain subdued at just 0.4% for the March quarter, inflation to remain below 2% this year, and a slightly weaker unemployment rate.

With those subdued forecasts in mind, we don't see much scope for the RBNZ to be surprised on the downside over the next few months.

Consequently, we regard the odds of a June OCR cut as low, and even an August cut seems unlikely at present. Longer run, the RBNZ is expecting GDP growth to accelerate rapidly, rising back above 3% annual GDP growth. The RBNZ expects one driver of that to be a perkier housing market – the RBNZ is forecasting an acceleration in house price inflation to around 5%, from the current 2.3%. Despite this, the RBNZ expects inflation to only slowly rise, surpassing 2% only in 2021.

Again, we agree with most of the RBNZ's assessment, with one caveat – we think the boost to the housing market will be bigger. There has been a very large reduction in fixed mortgage rates over the past month. Following today's OCR cut floating mortgage rates are going to fall, and there could be another round of reductions in fixed rates. Our view is that house price inflation will accelerate to something more like 7% per annum, and the housing market upturn will last longer than the RBNZ is forecasting. This view is not only based on low mortgage rates – the fact that the threat of a capital gains tax has disappeared is another reason to expect a housing market upturn.

According to the record of the MPC meeting, some members of the committee shared our concern that the housing market upturn could be larger than the RBNZ is forecasting.

On the global front, the RBNZ is expecting global economic growth to stabilise thanks to the large reduction in global interest rates that has occurred recently. Despite that, the RBNZ is expecting both oil prices and global prices for New Zealand export commodities, such as dairy, to fall (the rationale being supply dynamics). Once again, we broadly agree with the RBNZ's views on the global economy.

Given that the RBNZ's economic views are mostly similar to our own, we have to take them at face value on the OCR outlook – we see a risk of an OCR cut late this year, but it is not definite.

The forecast we issued on 3 April had the OCR falling to 1.5% today, remaining at 1.5% throughout 2019, but falling again to 1.25% in mid-2020. We are now rethinking that. An OCR cut is more likely to happen this year, or not at all. Because capital gains tax has been cancelled, we now think the housing market will be too strong in 2020 to warrant an OCR cut at that time. Over the coming couple of weeks we will ponder the question of whether or not the OCR will be reduced to 1.25% later this year, and update our OCR forecast accordingly.

Daily Pivots: (S1) 0.8539; (P) 0.8561; (R1) 0.8583; More...

EUR/GBP's consolidation pattern from 0.8472 is possibly extending with another rising leg for now. While further recovery cannot be ruled out, upside should be limited below 0.8681 resistance. On the downside, decisive break of 0.8472 will confirm resumption of down trend from 0.9101 and target 61.8% projection of 0.9101 to 0.8472 from 0.8681 at 0.8292 next.

In the bigger picture, medium term decline from 0.9306 (2017 high) is seen as a corrective move. Current development suggests that it's extending through 0.8312 support towards 50% retracement of 0.6935 (2015 low) to 0.9306 at 0.8121. We'll look for strong support around there to contain downside to complete the correction. But for now, break of 0.8681 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 1.5896; (P) 1.5973; (R1) 1.6040; More...

Intraday bias in EUR/AUD remains neutral for consolidation below 1.6064 temporary top. Further rise is still expected as long as 1.5806 minor support holds. We'd continue to favor the bullish case that correction from 1.6765 has completed with three waves down to 1.5683. On the upside, above 1.6064 will turn bias back to the upside for 1.6122. Decisive break of 1.6122 will confirm this bullish view and target retesting 1.6765 high. However, break of 1.5806 support will argue that fall from 1.6765 is resuming and turn bias back to the downside for 1.5683 low for confirmation.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Uptrend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.

Daily Pivots: (S1) 1.1384; (P) 1.1412; (R1) 1.1437; More...

Intraday bias in EUR/CHF remains neutral and consolidation from 1.1476 might extend. On the upside, sustained break of 38.2% retracement of 1.2004 to 1.1162 at 1.1484 will confirm completion of corrective fall from 1.2004. Further rally should then be seen to 61.8% retracement at 1.1682 and above. On the downside, sustained break of 55 day EMA (now at 1.1341) will pave the way back to retest 1.1162 low.

In the bigger picture, at this point, we're slight favoring the case that corrective fall from 1.2004 has completed after being supported by 61.8% retracement of 1.0629 to 1.2004 at 1.1154. Decisive break of 1.1501 resistance should confirm and target 1.1713 resistance next. And, firm break of 1.1154 is needed to confirm down trend resumption. Otherwise, medium term outlook will be neutral at worst.

Daily Pivots: (S1) 1.3427; (P) 1.3459; (R1) 1.3508; More...

Intraday bias in USD/CAD remains neutral as consolidation from 1.3521 is extending. Further rise is in favor as long as 1.3274 support holds, even in case of another deep retreat. On the upside, break of 1.3521 will resume the whole rise from 1.3068 to retest 1.3664 high. On the downside, below 1.3376 will turn bias to the downside for 1.3274 support. Break will indicate that choppy rebound from 1.3068 has completed at 1.3521. Near term outlook will be turned bearish for retesting 1.3068 support.

In the bigger picture, USD/CAD is staying well inside medium term rising channel (support at 1.3272). Thus, the up trend from 1.2061 (2017 low) should be in progress. On the upside, decisive break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 will pave the way to 78.6% retracement at 1.4127 next. This will remain the favored case as long as 1.3068 support holds. However, sustained break the channel support will be the first sign of medium term reversal. Firm break of 1.3068 would confirm.

Daily Pivots: (S1) 0.6973; (P) 0.7010; (R1) 0.7049; More...

AUD/USD is staying in consolidation from 0.6926 and intraday bias remains neutral. As long as 0.7069 resistance holds, near term outlook stays cautiously bearish and deeper decline is expected. On the downside, break of 0.6962 will resume the fall from 0.7295 to 100% projection of 0.7295 to 0.7003 from 0.7205 at 0.6913. Decisive break there will indicate further downside acceleration and pave the way to retest 0.6722 low. However, considering bullish convergence condition in 4 hour MACD, firm break of 0.7069 will indicate near term bottoming and turn bias back to the upside for 0.7205 resistance and above.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Daily Pivots: (S1) 1.1166; (P) 1.1193 (R1) 1.1219; More.....

EUR/USD is bounded in consolidation from 1.1111 and intraday bias remains neutral at this point. Near term outlook stays bearish with 1.1324 resistance intact. Further decline is expected. On the downside, break of 1.1111 low will target 100% projection of 1.1569 to 1.1176 from 1.1448 at 1.1105 next.

In the bigger picture, down trend from 1.2555 (2018 high) is still in progress. Current fall should now target 78.6% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.0813. Sustained break there will pave the way to retest 1.0339. On the downside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Daily Pivots: (S1) 1.3032; (P) 1.3082; (R1) 1.3124; More...

Intraday bias in GBP/USD remains neutral for the moment. Also, with 1.2987 minor support intact, further rise is mildly in favor. As noted before, corrective decline from 1.3381 should have completed at 1.2865 already. On the upside, above 1.3176 will target a retest on 1.3381 high next. On the downside, below 1.2987 minor support will dampen this bullish view and turn bias back to the downside for 1.2865 support instead.

In the bigger picture, medium term decline from 1.4376 (2018 high) halted and made a medium term bottom after hitting 1.2391. Rebound from 1.2391 is seen as a corrective move for now. In case of another rise, strong resistance could be seen around 61.8% retracement of 1.4376 to 1.2391 at 1.3618 to limit upside. On the downside, break of 1.2773 support will suggests that such corrective rise is completed and bring retest of 1.2391 low first.