COMMENT-EUR/USD insurance likely to be needed to cover losses
Nov 18 (Reuters) - FX traders can use a simple option to insure against EUR/USD suffering a bigger setback in coming sessions as the daily technical chart remains quite negative.
EUR/USD's recovery last week was capped by the daily Ichimoku cloud that spans the 1.1691-1.1723 region and has left this market in quite a fragile state. The expectation is for an eventual slump in coming sessions through the November 5 low of 1.1469 (EBS) initially, a sustained break below which would bring an even steeper decline to 1.1391 Fibo, a 61.8% retrace of the 1.1065 to 1.1985 (May to September) rise.
Those who want to protect against a short-term EUR/USD slump could buy a one-week 1.1580 EUR put option at a cost of 35 pips, priced with spot at 1.1583. Profit potential is unlimited if spot is below the 1.1545 breakeven point at the November 25 expiry. Losses are limited to the 35 pips premium paid.
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