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  • AUD/USD technical charts are flashing early signs of bullish trend reversal.
  • The drop in the value of AUD puts (bearish bets) supports the bullish case.

The AUD/USD created a hammer candle last week, signaling a bearish exhaustion. The currency pair has found acceptance above 0.71 today and could soon cut through falling trendline from January highs as both the RSI and stochastic are flashing bullish divergence on the daily chart.

The bullish case further strengthens if we take into account the drop in the value of the AUD put options.  

The AUD/USD one-month 25 delta risk reversals (AUD1MRR) rose to -1.0 Thursday, the highest since Oct. 2. The gauge stood at -1.2 on Oct. 26. The recovery from -1.2 to a one-month high of -1.0 represents the fall in demand or implied volatility premium for the out of the money put options.

AUD1MRR