The EUR/USD's recent gains have been capped by technical and fundamental factors, but FX traders can use a simple option strategy to insure against a bearish reversal.
EUR/USD's recent peak was at the 1.0787 Fibonacci, a 38.2% retrace of the fall from 1.1495 to 1.0349, halted the rise.
The thickening and falling daily Ichimoku cloud, that currently spans the 1.0788-1.0955 region, could also limit the upside.
This increases the likelihood of a drop in the days ahead.
The euro edged further away from a monthly high and the U.S. dollar nudged higher, lifted by higher Treasury yields as global inflation worries flared anew. nL1N2XO0FW
Those seeking protection against a EUR/USD fall can buy a one-week 1.0710 EUR put option at a cost of 41 pips, priced with spot at 1.0723.
Profit potential is unlimited if spot is below the 1.0669 break-even point at the June 8 expiry.
Losses are limited to the 41-pip premium paid.
For more click on FXBUZ