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Feb 04 - 07:55 AM

USD/JPY - COMMENT-FX Traders Can Protect Against A Big USD/JPY Surge

By Martin Miller  —  Feb 04 - 05:58 AM

FX traders can use a simple option strategy to cover a possible dollar surge against the yen that could be caused by a continued shift in investor sentiment and the growing bullish technical picture on the daily USD/JPY chart.

Sentiment for the dollar has improved as progress in coronavirus vaccinations, moves by U.S. President Joe Biden to pass more fiscal stimulus, and improving economic data forced some bearish investors to give up their short positions nL4N2KA1DV.
USD/JPY demand has been compounded, as in times of rising risk appetite, funds usually flow out of the safe-haven yen.

USD/JPY registered a daily close above the 104.32 daily cloud top last Friday for the first time since June 2020, that has unmasked the 200-DMA at 105.60.
Tenkan and kijun lines are positive aligned, reinforcing the overall bias.

Traders who want to insure against a USD/JPY surge could buy a two-week 105.30 USD call option at a cost of 38 pips, priced with spot at 105.25.
Profit potential is unlimited if spot is above the 105.68 break-even point at the Feb.
18 expiry.
Losses are limited to the 38 pips premium paid.
Related EUR/USD option play nL1N2K90SA.

For more click on FXBUZ

Fenics Pricing Grid: Click here

Daily Chart: Click here

Refinitiv IFR Research/Market Commentary


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