NZD/USD risk reversals drop on head and shoulders breakdown

NZD/USD dropped to a low of 0.7197 yesterday before ending the day on a weaker note at 0.7232 levels. The Kiwi remains on the back foot this Thursday morning in Asia.

Daily chart

The chart above shows head and shoulders reversal pattern. As of now, the spot is trading below the neckline level of 0.7230. An end of the day close below the key level would confirm bearish trend reversal.

The NZD/USD options market now favors further downside in the pair.

One-month 25 delta risk reversal

The risk reversal fell to -1 yesterday and has extended the slide to -1.175 levels today. The drop represents increased demand for Put options i.e. bearish bets.