AUD/USD risk reversals rise, yield differential still favors the bears

AUD/USD rose to a four-day high of 0.7809 in Asia as the overnight gains in the EUR/USD and fears that Trump's tax reform plan could be hitting a major speed bump strengthened the offered tone around the US dollar.

The currency pair was last seen trading around 0.7791 (100-day moving average).

Risk reversals rise

• The one-month 25-delta risk reversal rose to -0.65; the highest level since September 15. The improvement indicates falling demand for the downside bets, i.e. Put options.

Yield differential favors the bears

• The chart shows the spread between the Australia and US 10-year bond yield remains in favor of the bears as suggested by the bearish symmetrical breakdown. The spread currently stands at 48 basis points.

AUD/USD Technical Outlook

FXStreet Chief Analyst Valeria Bednarik writes, "Short term, the 4 hours chart shows that the price settled a few pips above a still bearish 20 SMA, whilst technical indicators barely entered positive territory before losing upward strength, indicating that buying interest is still limited around the commodity-related currency."