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Options Opting for AUD Upside Protection

AUD
  • No surprise to see subdued currency options volumes given the US market holiday, but AUD trading is holding up slightly better ahead of Tuesday's rate decision.
  • Solid demand for 0.7600 call options Monday has tilted the put/call ratio in favour of upside protection, which corroborates with the improvement in front-end risk reversals contracts across AUD/USD - including when capturing tomorrow's rate decision. Vols more broadly have inched higher, with 1m implied today rising to the best level in just over a week.
  • Market pricing is slightly more even-handed, with implied odds of a 0.5% move higher/lower for AUD/USD by the end of the week at 62.6%/61.5%.
  • Focus of Tuesday's meeting falls on the Bank's yet to be implemented taper, which, if it is upheld, will go into play in the coming days.
  • Full MNI Preview here: https://roar-assets-auto.rbl.ms/documents/11769/RBA%20Preview%20-%20September%202021.pdf

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