For the Australian dollar, the perspective among options traders looks to be significantly different from one another. The occurrence of risk reversals is increasing concurrently with the rise in spot prices, which indicates an increase in demand for calls (bullish positions) in comparison to puts (bearish positions). The implication of this is that any potential decrease in the AUD/USD exchange rate may be constrained until the next potential upward trend.
The Consumer Price Index figures for the third quarter of Australia exceeded expectations across all key categories. This result strengthens the idea that the Reserve Bank of Australia may have already hit the terminal rate of its easing cycle, which is currently at 3.35 percent. It also decreases the possibility that a rate drop will occur next week or perhaps this year. The AUD/USD pair may continue its upward trend into the new year if the forthcoming data from the United States is dovish and boosts predictions of rate reduction from the Federal Reserve.
In a graph that depicts the spot price of the Australian dollar relative to the United States dollar alongside one-week and one-month 25-delta risk reversals, both lines are shown to be going higher with the spot price. Following the release of CPI data that was higher than anticipated, this demonstrates that there is a greater demand for calls as opposed to puts, which indicates that sentiment toward the Australian dollar is improving. Despite this, the FOMC meeting that was less dovish than expected overshadowed the solid Australian data, which caused the AUD/USD pair to break a five-day winning run and form a bearish pinbar around the 0.66 handle. This pinbar was formed close to the monthly pivot point and the October volatile price of the month.
Additionally, the daily RSI (2) was dragged down from overbought zone by the one-day bearish reversal candle, which is a significant indicator that a small pullback or consolidation phase is imminent. On the one-hour chart, a bullish pinbar and doji have developed close to the weekly R2 pivot, and the RSI (2) indicates that conditions are extremely oversold. There is a possibility that there will be a short-term rebound during the Asian session; however, there is also the possibility that sellers will be back to push prices near the weekly R1 (0.6573) or upper gap support (0.6528). The confirmation of a swing low on the daily chart will be essential in order to anticipate the subsequent upward advance in the Australian dollar in the event that a pullback appears to be occurring.