NZD/USD risk reversal indicates trend line support may hold

NZD/USD clocked a high of 0.7558 on July 27 before falling to a low of 0.7393 on Friday. The trend line sloping upwards from the May 12 low and July low is seen offering support around 0.7370 levels. 

Daily chart

One-month 25 delta risk reversal chart

The chart above shows Friday’s the one-month 25 delta risk reversal has improved from -0.756 on Friday to  -0.65 this Monday morning in Asia. 

The uptick in the risk reversal [falling demand for put options] indicates the Friday’s weakness in the spot could be short lived and the rising trend line support of 0.7370 could remain intact. 

Watch out for- 

A rebound off the trend line support and a sustained rise in the risk reversals would indicate the technical pullback has ended.