AUD/USD: risk reversals retrace bearis bias, hit one-month high

• The AUD risk reversals have hit a one-month high in Asia, signaling a drop in demand for the AUD puts (bearish bets).
• The turnaround in the sentiment in the options market indicates the spot will likely break above the long-term falling trendline.

The AUD one-month 25 delta risk reversals rose to -0.75 today - the highest level since July 9, having hit a low of -1.00 on July 20.

The rise from -1.00 to -0.75 indicates a drop in demand or a drop in the implied volatility premium for the AUD puts.

The bearish sentiment in the options market has weakened, which could be an indication the investors are likely expecting a big bullish breakout in the AUD/USD.

At press time, the currency is trading at 0.7445. A break above 0.7452 (resistance of the trendline sloping downwards from the Jan. 26 high and July 6 high) would signal a bear-to-bull trend change and may boost demand for the AUD calls.