AUD/USD Review: Put demand drops as spot charts double bottom pattern

• AUD/USD put demand has dropped sharply in the last few days, risk reversals indicate.
• The currency pair is charting a double bottom bullish reversal pattern with a neckline resistance of 0.7484.

The AUD/USD put demand has dropped sharply in the last six days, adding credence to pair’s recovery from the low of 0.7318 and increased prospects of a double bottom reversal.

As of writing, the one-month 25 delta risk reversals (AUD1MRR) stand at -0.80 vs -1.0 on July 20, representing a falling implied volatility premium or falling demand for the AUD put options (bearish bets).

AUD1MRR

The investor interest in the AUD put options has declined, likely due to the AUD/USD’s turn higher from the July 20 low of 0.7318. The currency pair could rise further as the Chinese yuan is in a recovery mode and the dollar index is flirting with a bearish breakdown.

Consequently, the AUD/USD could soon rise above 0.7484 (double bottom neckline), confirming a double bottom breakout (bearish-to-bullish trend change). The bullish reversal would open the doors to 0.7650 (target as per the measured height method).

Daily chart

Spot Rate: 0.7442

Daily High: 0.7463

Daily Low: 0.7432

Trend: Bullish above 0.7484

Resistance

R1: 0.7470 (50-day moving average)

R2: 0.7484 (double bottom neckline)

R3: 0.7494 (50% Fib R of June 6 high – July 2 low)

Support

S1: 0.7410 (10-day moving average)

S2: 0.7360 (July 24 low)

S3: 0.7318 (July 20 low)