AUD/USD risk reversals: Bearish bias strengthens ahead of the Aussie CPI release

AUD/USD risk reversals hit the lowest since March 28 - indicates a bearish bias.
Eyes Australia first-quarter CPI release.

Omkar Godbole FXStreet Contributor

The AUD/USD one-month 25 delta risk reversals fell to -0.875 (AUD 0.875 puts) - the lowest level since March 28, indicating increased demand for the AUD puts (sell AUD).

The risk reversals gauge stood at -0.55 last week. The decline or the increase in the implied volatility premium for the AUD puts adds credence to the recent decline in the AUD/USD from 0.7813 to 0.7597 and signals investors are preparing for a deeper sell-off.

Analysts at Nomura are expecting a 0.6% quarter-on-quarter rise in Australia’s headline CPI inflation in Q1, which would see year-end inflation rise to 2.1% year-on-year from 1.9%. A better-than-expected CPI could help the Aussie dollar regain poise. That said, big gains are unlikely as the focus seems to have shifted to rising Treasury yields.

AUD1MRR

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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