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NZD/USD: Put value hits 17-month high

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  • NZD/USD three-month risk reversals hit the lowest level since April 2017 today.
  • The solid demand for put options indicates investors are preparing for a deeper drop in the NZD/USD pair.

The NZD/USD three-month 25 delta risk reversals (NZD3MRR) fell to -1.525 today, the lowest level since April 19, 2017, implying the implied volatility premium for the NZD put options (bearish bets) is at 17-month highs.

The number indicates the investors are likely expecting a deeper drop in the NZD and hence hedging for the same by building long NZD put positions.

So, it seems safe to say that the bullish divergence of the 14-day relative strength index (RSI) is unlikely to yield a significant rally.

NZD3MRR

 

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