FxWirePro: Watch out for USD/JPY break-out below demand zone at 100.531 – “Debit put spreads” to build fresh shorts

Despite tight range between 102.436 on the north to 100.748 on the south, the pair manages to break supports at 100.531.

Since the current prices have slid below 7DMA, on-going downswings may drag up to channel base.

You can probably observe previous upswings are restrained exactly at channel resistance again (at 107.494 levels).

Even if any abrupt upswings arise we could see the upside potential in the pair capped at 107.500 levels max (upside range in whipsaws and 21EMA), intraday sentiments are still bearish bias. 

If these bearish sentiments continue to hold on then more slumps seem likely and find next support only at 9.948 marks. 

US inflation data and build permit are the major focus for the day, whereas Japanese GDP (QoQ) has disappointed the streets by missing forecasts, actual 0.0% versus forecasts at 0.2% and previous 0.5%.

On a broader perspective, major downtrend still remains intact as the price declines in the sloping channel.

Long Legged Doji while 7EMA crosses below 21EMA, price dips are in conformity to leading & lagging indicators and massive volumes.

FX Option Trading Tips: Bear put spread

Spot ref: 100.262, USDJPY 1W IVs are at around 9.6% (while articulating).

We wouldn't be surprised if it shows interim spikes, bears likely to drag again towards 98.500 levels sooner or later as the delta risk reversals favour bearish targets, hence in order to tackle these tricky swings we reckon debit put spreads are best suitable as the IVs  and premiums are reasonable considering daily swings on technical charts.

So, here goes the strategy, Debit Put Spread = Go long 1M ATM -0.49 delta Put + Short 1W (1%) OTM Put with lower Strike Price with net delta should be at -0.40.

For a net debit bear put spread reduces the cost of trade by the premium collected (on the shorts of OTM put) and keeps option trader to participate in downward moves and any upswings in abrupt.