FxWirePro: Hedge euro downside risks via PRBS amid attempts to prevent Grexit

The euro spiking more than 1% against the yen on hopes that Greece was making some progress in its efforts to secure more funding and avoid Grexit.

The common currency climbed 1.3% versus the yen to 135.60 and added 0.7% against the dollar to trade at $1.1115. It also rose 0.5% against the Swiss franc and the British pound.

Any global risk aversion from Grexit will buoy the yen. So stay short on EUR/JPY is the optimal cross to trade a Grexit scenario.

To repeat our earlier recommendation, sell EUR/JPY at 136.70 levels, with a stop on a daily close above 138, targeting 133. It may show some bounces but selling on rallies around 136.70 - 137 levels may set an optimal entry positions.

On Currency Hedging Standpoint: (EURJPY)

Hedge this pair's potential slumps through deploying option strategy (Put Ratio back Spread) as weekly technical charts suggest bearish bias.

%D line crossover above 80 levels on slow stochastic signals overbought pressures, (currently, %D line at 73.8829 & %K line at 69.6002). RSI (14) also indicates downward convergence with falling prices, (RSI trending at 49.3084).

As we expect the underlying currency (EURJPY) to make a large move on the downside in medium term.

Purchase puts and sell fewer puts of a higher strike (ITM) usually in a ratio of 2:1.

We recommend purchasing 1M (-0.25%) OTM -0.46 delta put (strike at 136.137) and one more 1M (-0.5%) deeper Out-Of-The-Money -0.43 delta put (strike at 135.808) and simultaneously short 1M (1%) ITM put (strike at 138.194).  Give shorts a longer time to expiration so as to make a substantial move on the downside.