AUD/USD bearish hedging intensifying – delta risk reversal indicates costlier puts

Bearish candles such as hanging man 0.7376 have been piling up despite the short-lived upswings to 0.7440, the OTC options market appeared to be more balanced on the direction for the pair over the 1M to 1y time horizon as hedgers have been cautious on long term downtrend that has lasted since mid April 2013 and as a result delta risk reversal for AUDUSD was turning into negative.

From the nutshell, 25-delta risk of reversals of AUDUSD the most expensive pair to be hedged for downside risks as it indicates puts have been over priced. As it showed the highest negative values indicate puts are more expensive than calls (downside protection is relatively more expensive). For the 6 months to 1 year time frame, delta risk reversal is getting closer to -2.

On weekly charts lagging indicator suggests the current spikes are well below 20 weeks moving average. While stochastic curves remained below 20 levels yet it is attempting for %D line crossover which is a signals of current downtrend continuation, while to boost up this the bearish view prevailing prices are trading below moving average curve comfortably.