- 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)