Traders are keeping an eye on Sino-U.S.
trade talks, which are set to resume in October, as constantly shifting calculations of the prospect of a deal keep markets on edge nL3N26F1DG.
USD/JPY's direction is at the mercy of the talks, but three technical reasons hint that USD/JPY is near-term buy.
First, USD/JPY left a long tail on Monday's candlestick line, usually a sign that the downside is being rejected.
Second, bulls staged their fight back from Monday's 107.32 low, ahead of the thick daily cloud, which currently spans 106.60-107.19.
And third, USD/JPY bears failed to register a daily close below the 107.53 Fibonacci level, a 23.6% retrace of the 104.46-108.48 (August to September) rise.
Those worried about USD/JPY's upside risk can buy a two-week 107.70 USD call option for a cost of 45 pips.
Profit potential is unlimited if spot rises above the 108.15 break-even point before the Oct.
The 45 pips should be worth paying, as any losses would be limited to the premium paid.
Daily Chart: Click here