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AUD: OTM Calls in Vogue as Spot Momentum/China News Bolsters Demand for Upside

AUD
RegionGlobalBulletAPACForeign Exchange BulletsAustraliaMarkets
  • The China-stimulus tripped rally in Antipodean currencies continues to play out in options space, with front-end AUD/USD risk reversals extending their correction higher to tighten the premium of put vol over call vol to 0.52 points, the smallest since mid-July.
  • This is further reflected in better hedging volumes across AUD both this week and overnight - just over $2 in AUD calls have traded for every $1 in puts in DTCC-tracked trade, as particular interest in 0.6900-10 strikes buoy volumes (over $500mln across these strikes overnight).
  • Since Monday, call strikes layered between 0.6850-900 have been a particular focus. As such, the market-implied odds for AUD/USD to be trading above 0.70 at year-end have risen to 37% (from 25% this time last week) and the likelihood for the pair to touch 0.75 have nearly doubled to 7.6%.
  • Technically, the bull cycle remains underway, with 0.6915 the next hurdle ahead of 0.6984, the 0.764 projection for the Aug 5 - 29 - Sep 11 price swing.
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  • The China-stimulus tripped rally in Antipodean currencies continues to play out in options space, with front-end AUD/USD risk reversals extending their correction higher to tighten the premium of put vol over call vol to 0.52 points, the smallest since mid-July.
  • This is further reflected in better hedging volumes across AUD both this week and overnight - just over $2 in AUD calls have traded for every $1 in puts in DTCC-tracked trade, as particular interest in 0.6900-10 strikes buoy volumes (over $500mln across these strikes overnight).
  • Since Monday, call strikes layered between 0.6850-900 have been a particular focus. As such, the market-implied odds for AUD/USD to be trading above 0.70 at year-end have risen to 37% (from 25% this time last week) and the likelihood for the pair to touch 0.75 have nearly doubled to 7.6%.
  • Technically, the bull cycle remains underway, with 0.6915 the next hurdle ahead of 0.6984, the 0.764 projection for the Aug 5 - 29 - Sep 11 price swing.