Japanese exporter USD/JPY offers near 110.00 seem to limiting the upside, as is a growing negative technical outlook.
A simple option strategy can be used to cover a likely short-term relapse.
USD/JPY left a bull trap above the thin daily cloud, which currently spans the 110.10-11 region, on Thursday and Friday, meaning the bias is on the downside.
A bull trap is set when a market breaks above a technical level but subsequently reverses.
Scope is for eventual losses through the 109.12 August 16/17 matching lows in coming sessions, especially as dollar's biggest long in nearly 18 months wrong-footed nL1N2Q00LQ.
To insure against a USD/JPY setback, traders could, for example, buy a one-week 109.85 USD put option at a cost of 30 pips, priced with spot at 109.85.
Profit potential is unlimited if spot is below the 109.55 break-even point at the September 7 expiry.
Losses are limited to the 30 pips premium paid.
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