FX traders could use a simple put option to protect against a EUR/USD revival in the coming week, as near-term technical developments on the daily chart hint at possible near-term gains.
EUR/USD failed to maintain trading under the 1.1887 Fibo, a 61.8% retrace of the 1.1602 to 1.2349 (November to January) EBS rise, giving bulls hope.
Two daily closes in a row, on Wednesday and Thursday, above the tenkan line, currently at 1.1913, hint at a potential recovery.
The dollar gave up early gains on Friday as Treasury yields dipped from near 14-month highs, as investors digested the Federal Reserve's downplaying of expectations interest rates will rise soon nL1N2LH0CV.
That could see the dollar weaken in the near term, which would also help to underpin EUR/USD.
To insure against a EUR/USD recovery, for example, traders could buy a one-week 1.1920 EUR call option at a cost of 37 pips, priced with spot at 1.1910.
Profit potential is unlimited if spot is above the 1.1957 break-even point at the March 26 expiry.
Losses are limited to the 37 pips premium paid.
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