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