USD/JPY: value of bearish bets has dropped sharply in the last three days
The USD/JPY one-month 25 delta risk reversals (JPY1MRR) are currently trading at -1.60 in favor of the put options (bearish bets). Notably, the gauge stood at -2.27 on Jan. 1.
The uptick from -2.27 to -1.60 represents a drop in the implied volatility premium or demand for put options.
Moreover, the data indicates that investors are no longer buying bets to protect against a rise in the Japanese currency (fall in USD/JPY).
That validates the oversold conditions reported by USD/JPY's 14-day relative strength index (RSI) and the pair's ongoing recovery rally.