USD/JPY risk reversal points to a bear trap

The Dollar-Yen pair rose to 112.19 on Wednesday before the post FOMC sell-off in the USD pushed the spot down to 110.87 (session low). The sharp retreat from the high of 112.19 puts a question mark on the bullish Doji reversal pattern seen earlier this week. 

The one-month 25-delta risk reversal indicates the market has turned bullish following the Doji reversal confirmed on Tuesday. 

The 25-delta risk reversal has improved from minus 1.35 (on last Friday) to minus 1.10 as of yesterday. 

Traders should take note of the divergence between the spot and the risk reversal as it could be a sign of a bear trap in the USD/JPY pair.