- The AUD/USD risks falling 0.71 for the first time since March 2016.
- The AUD put value hit the highest level since April 7, 2017, signaling investors are expecting a deeper drop in the Aussie dollar.
The escalating trade war between the US and China and the widening US-Aussie rate differential could push the AUD/USD pair below 0.71 for the first time since March 2016.
Notably, the AUD/USD one-month 25 delta risk reversals (AUD1MRR) have dropped to -1.65 today - the lowest level since April 7, 2017 - indicating the implied volatility or the demand for the AUD puts is at a17-month high.
It indicates the investors are likely expecting a deeper drop in the AUD and hence buying put options as a hedge against the long spot positions.
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