USD/JPY has recently struggled to remain above 110.00 and the daily technical chart hints at further negative trading sessions ahead.
A simple option strategy can be used to cover a likely short-term relapse.
USD/JPY left multiple bull traps above the daily cloud, which currently spans the 109.77-110.19 region, increasing the odds of a downside breakout.
A bull trap is set when a market breaks above a technical level but subsequently reverses.
A drop under the August 16/17 109.12 low would heighten the downside risk, though bears should beware: we have been stuck in a relatively narrow multi-week 108.73-110.80 range.
To insure against a USD/JPY setback, traders could, for example, buy a two-week 109.35 USD put option at a cost of 45 pips, priced with spot at 109.35.
Profit potential is unlimited if spot is below the 108.90 break-even point at the Sept.
Losses are limited to the 45 pips premium paid.
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