June 12 (Reuters) - There are several reasons why EUR/USD could be set for a bigger recovery and FX traders can use a simple option strategy to capture potential gains. Thursday's candlestick left a long tail, pointing to a rejection of the downside. This suggests scope for initial gains to 1.1633 Fibo, a 38.2% retrace of the 1.1849 to 1.1500 (April to June) EBS fall. Downside momentum also failed to sustain breaks on Monday and Thursday below the 1.1513 Fibo, a 76.4% retrace of 1.1409 to 1.1849 (March to April) rise. This raises the risk of a bear trap - when a market breaks below a technical level but then reverses, usually a bullish sign.

Seasonality is another support. EUR/USD has risen in 16 of the last 26 years, so a close above this month's 1.1655 open would reinforce that pattern. Those looking to position for the upside can buy a one-week 1.1570 call option for 40 pips, priced with spot at 1.1564. Profit potential is unlimited if spot rises above the 1.1610 break-even point before the June 19 expiry. Losses are limited to the premium paid.
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(Martin Miller is a Reuters market analyst. The views expressed are his own.)