BUZZ-COMMENT-Traders need to think about EUR/USD's downside risk
Feb 13 (Reuters) - FX traders can use a simple option to insure against a EUR/USD drop, something spot normally does in February. It's not usually a good idea to be long EUR/USD in February.
The euro rose to a one-week high against the U.S. dollar on Thursday as news that Washington aims to begin talks with Russia to end the war in Ukraine overshadowed a hotter-than-expected U.S. consumer prices reading overnight. However, the thick daily cloud resistance that currently spans the 1.0384-1.0581 region, should continue to limit the upside.
As 14-day momentum turned negative last week, that highlights the recent shift in risk back to the downside. Those who want to protect against a short-term EUR/USD relapse could buy a one-week 1.0410 EUR put option at a cost of 45 pips, priced with spot at 1.0416. Profit potential is unlimited if spot is below the 1.0365 break-even at the February 20 expiry. Losses are limited to the 45-pip premium paid.
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