AUD/JPY turns positive, risk reversal continues to rise

AUD/JPY has recovered losses and currently trades on the front foot around 86.45 levels. The cross is eyeing the 50-DMA hurdle located at 86.53 levels. 

Risk-off fades

The terror led rise in the Japanese Yen was quickly undone after news hit the wires that Spanish police have been successful in avoiding a second terror attack. The rebound from the session low of 86.03 adds credence to the one-month 25-delta risk reversal, which shows falling demand for the downside protection i.e. Put options. 

The risk reversal has improved from -2.08 [Aug 9] to the current level of -1.81. Moreover, the rise in the risk reversal contradicts the bearish outside day/engulfing candle seen on the AUD/JPY daily chart. 

AUD/JPY Technical Levels

A break above 86.505 [38.2% Fib R of 81.78-89.42] would expose 86.66 [10-DMA], above which a major hurdle is seen at 87.00 [July 4 high]. On the downside, breach of support at 86.00 [zero figure] would open up downside towards 85.45 [recent low] and 85.10 [200-DMA].