USD/JPY risk reversals drop to 1-month low, bull trap in the spot?

• Risk reversals hit 1-month low, signal bearish sentiment in the options market.
• USD/JPY may struggle to hold on to the rebound from 50-day MA support.

The one-month 25 delta risk reversals fell to -1.20 yesterday; the lowest level since Oct. 19. The decline from the recent high of -0.70 indicates increasing demand for the JPY calls (bullish bets on Yen).

The decline in the risk reversals, coupled with the head and shoulders breakdown on the USD/JPY chart could be an indication of a bull trap, i.e. recovery from yesterday's low of 112.48 to 113.00 could be short-lived.