Credit: REUTERS/DADO RUVICSept 20 (Reuters) - Foreign exchange traders can use a simple option strategy to insure against a EUR/USD drop in coming sessions, as the euro remains vulnerable to downward pressure despite the latest recovery attempts.
The U.S. dollar has room to head higher, while the speculative long position is unlikely to inhibit gains in the greenback. That should exert downward pressure on EUR/USD in the week where the U.S. Federal Reserve is likely to deliver another hefty rate hike. .
EUR/USD needs to drop and remain under the 0.9943 Fibonacci level, a 76.4% retrace of the 0.9864 to 1.0198 (EBS) rise, in order to weaken the market structure further.
Those who want to insure against a EUR/USD relapse can buy a one-week 1.0000 EUR put option at a cost of 65 pips, priced with spot at 1.0010. Profit potential is unlimited if spot is below the 0.9935 breakeven point at the September 27 expiry, while losses are limited to the premium paid.
For more click on FXBUZ
Option Pricing Grid: https://tmsnrt.rs/3xBP4iK
Daily Chart: https://tmsnrt.rs/3qXBlPn
(Martin Miller is a Reuters market analyst. The views expressed are his own)
((martin.miller@thomsonreuters.com))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
