AUD/USD: Risk reversals at 1-month high & Vols lowest since July, further gains on cards?
The currency pair is up 1.38% from the October 6 low of 0.7733. The options market activity suggests the corrective rally is likely to continue in the short-run.
Risk reversals at 1-month high
- The 25-delta risk reverals gauge currently stands at -0.625; the highest since mid September. A negative number indicates Puts (downside bets) are more expensive (more in demand) as compared to Calls (bullish bets).
- Still, an improvement to one-month high adds credence to the ongoing technical recovery in the spot.
Vols at lowest since July
- The one-month at-the-money (ATM) volatility gauge fell to 7.575 yesterday; the lowest since mid-July. Implied Volatility spikes when the market is bearish on the underlying and vice versa. Thus, a drop in the implied volatility (estimated volatility) indicates the AUD is likely to remain bid in the short-run.