NZD/USD risk reversal: Sellers have regained control

The post-RBNZ spike in the NZD/USD to 0.7368 was short lived. This is not surprising, if we take into account the sharp drop in the one-month 25-delta risk reversal. 

Daily Chart

As seen on the chart above, the NZD/USD pair breached the rising trend line support on Monday. Interestingly, the 25-delta risk reversal topped out at -0.7 on Monday and fell to -1.013 yesterday. The drop in the risk reversal indicates an increased demand for put options. 

One-month 25-delta risk reveral

It is quite clear that sellers have regained control of the pair and the spot looks set to test support at 0.7202 [July 11 low].