If risk appetite returns USD/JPY should rebound, and a simple option strategy can be used to capture a near-term recovery.
Markets are nervous about riskier assets before the release of the Federal Reserve's June policy minutes, which will likely show how serious members are about tapering their asset buying and how early rate hikes could begin nL5N2OJ1E3.
Recent uncertainty has seen funds flow into the safe-haven Japanese yen which has weighed on USD/JPY.
USD/JPY's setback found support just under the daily kijun line that is currently at 110.43 in Asia.
As the tenkan and kijun lines remain positively aligned, the overall scope is for a bullish resumption in coming sessions.
EUR/JPY could see gains also, as the 30-day log correlation with USD/JPY risings well above +0.5.
To insure against a USD/JPY recovery traders could, for example, buy a one-week 110.80 USD call option at a cost of 32 pips, priced with spot at 110.75.
Profit potential is unlimited if spot is above the 111.12 break-even point at the July 14 expiry.
Losses are limited to the 32 pips premium paid.
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