OTC IVs and sensitivity table, we consider 1M ATM IVs at 12.00% at spot FX 0.7332 levels which is still the highest among G10 currency pool and 11.89% for 1W tenors.

The pair still signals highest bearish sentiments among G10 currency space in next 1 month’s timeframe.

So, you would cross the threshold into a risk reversal if you want to hedge your underlying risk while lowering the cost of the premiums. Here OTC FX market indicates, this APAC currency pair seems more sensitive towards downside risks, as a result puts looks to be overpriced.

Market pricing well reflects this view that the RBA will ‘eventually’ ease below 1.5%.

On data front, Aussie is scheduled to announce GDP, retail sales, building permits, consumer confidence and trade balance prints during next week.

 If you shift the view on lower strikes (let’s say 100 pips below i.e. 0.7150), the skew is rising to 0.39%.

Skew refers to the situation where at a given strike price, IV will either increase or decrease as the expiration month moves forward into the future.

When a skew develops into a smile, there is an expectation of greater price movement in the future, causing the chart pattern to turn up into a smirk or smile.

Subsequently, if you glance on sensitivity table for the different rate scenarios and their probabilistic outcomes, at spot ref: 0.7250 we've just referred 1.5% OTM strikes and their vols, it showed -0.37 as delta values for underlying outrights, that means 37% chances of finishing in-the-money.

Keeping the above both fundamental and technical factors in mind, it is advisable to go long in 1M (1%) OTM 0.36 delta call while writing 1W (1%) ITM call with positive theta and delta closer to zero (both sides use European style options), this credit call spread option trading strategy is recommended when the gold spot price is anticipated to drop moderately in the near term and spikes up in long term.

Trade expects that the underlying gold spot price would drop to ITM strikes on expiration and thereafter bounce back again.