April 9 (Reuters) - FX traders can use a simple option to insure against a near-term EUR/USD setback, as a technical signal points to downside risk.

EUR/USD on Wednesday soared above the 1.1667 Fibo, which is a 38.2% retrace of the 1.2084 to 1.1409 (January to March) EBS drop, but failed to close above it.

That is a potential "bull trap," set when a market breaks above a technical level but then reverses, and is usually a bearish sign. EUR/USD rallied on Wednesday after U.S. President Donald Trump agreed to a two-week ceasefire with Iran. A significant breakdown in the ceasefire, which is seen as fragile, could lead to a big EUR/USD relapse.

Those who want to protect against a short-term EUR/USD slump could buy a one-week 1.1660 EUR put option at a cost of 40 pips, priced with spot at 1.1620. Profit potential is unlimited if spot is below the 1.1620 breakeven point at the April 16 expiry. Losses are limited to the 40 pips premium paid.
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(Martin Miller is a Reuters market analyst. The views expressed are his own)