BUZZ-COMMENT-FX traders should seek downside insurance

Nov 24 (Reuters)FX traders can use a simple option strategy to cover any renewed risk aversion that would see funds flow back into the safe-haven Japanese yen at the expense of the U.S. dollar and the euro.

USD/JPY has risen, along with stocks, as the formal go-ahead for U.S. President-elect Joe Biden to begin his transition added to an already brighter mood from COVID-19 vaccines and the prospects for a speedy global economic revival .

USD/JPY technical outlook remains negative. Its recent recovery has been stymied by 104.67 Fibonacci level, a 50% retrace of the 105.68 to 103.66 November setback. Chances are good for a bearish resumption towards the November’s 103.18 low in coming sessions.

Traders who want to insure against a USD/JPY decline could buy a one-week 104.25 USD put option at a cost of 32 pips, priced with spot at 104.27.

Profit potential is unlimited if spot is below the 103.93 break-even point at the Dec. 1 expiry. Losses are limited to the 32 pips premium paid.

For more click on FXBUZ

Daily Ichimoku Chart: https://tmsnrt.rs/3lZpdJT

Fenics Pricing Grid: https://tmsnrt.rs/3mcMlEw

(Martin Miller is a Reuters market analyst. The views expressed are his own)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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