FxWirePro: EUR/JPY debit spreads for risk averse on hedging front

As the risk appetite and business objective varies from different investors to different traders, we've customized our formulation of strategies for such varied circumstances.

Technical Glance:

This has always been extremely tough & risky to have opened naked position on non-directional trend. EUR/JPY is now alike a non directional pattern as this pair is boiling up with lots of bearish candles, such as spinning top and candle resembling a shooting star occurred at 135.802 and 135.793 respectively.

On weekly technical graphs, %D line crossover on slow stochastic above overbought trajectory signifies the diminishing buying interest in this pair. While, RSI (14) is currently trending near 47.1599 levels with downward convergence to the price dips.

Option Currency Hedging: Debit Put spreads:

Although the there is no trace of either overbought or oversold situation, it alarms bears trying to take over the rallies as the slow stochastic noises with %D line cross over around 40 levels (current %D line flashes at 42.6134).

On a long term hedging perspective, debit put spreads are advocated as the selling indications are piling up on weekly graph. So selling an Out-Of-The-Money put option is recommended to reduce the cost of hedging by financing long position in buying In-The-Money Puts.

So, buy 15D (1%) In-The -Money -0.69 delta put option and short 15D (-1%) Out-Of-The-Money put option for net debit.