NZD/USD 1-month ATM Vol rises to highest since April 18

The 1-month at-the-money (ATM) option volatility in NZD/USD jumped to 9.11; its highest level since April 18.

The Kiwi fell to a low of 0.7260 in early Asia after the New Zealand June CPI missed estimates. However, broad based USD selling on Trump health care debacle lifted the spot back to near 0.7350 levels.

On the weekly chart, the pair witnessed a bullish break of the 12-month long sideways channel. However, of late the upticks above 0.7345 have been met with selling pressure. The 14-day RSI is above 50.00 and yet to hit overbought territory, thus suggesting room for further gains

25 delta risk reversals rise

1-month 25 delta risk reversal, which had diverged from the NZD/USD in mid June, are back in sync with the rally in the NZD/USD. The risk reversal currently stands at -0.72. Though negative, it has come a long way from the April low of -1.669 and the recent low of -1.103. The recovery points to falling demand for Puts. When coupled with rising volatility as seen in the chart below, it suggests the NZD/USD spot could eventually break higher towards the weekly 200-MA of 0.7431.


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