Categories

Archives

Swiss Franc Futures Volatility Forecast (24/07/2011)

Swiss Franc futures had a quite choppy week because the price action has been trading within a narrow range for 5 consecutive days. Specifically, the market opened at 122.4 on Monday, dropped to 121.3 on Tuesday, rose to 122.04 on Wednesday, jumped to 122.7 on Thursday and closed at 122.1 on Friday.

The actual volatility is 0.61% (9.6% annualised) and the TGARCH graph is showing a very stable volatility curve which is characterised, at least in the very last part, by a great smoothness and by the total absence of short term choppiness although it is sensibly upward sloping.

It is important to point out that Swiss Franc futures are now very close to the 123 level which has been tested only twice over the last 2 years and has never been violated. In fact, although we had 2 days whose closing prices were around 123.04 – 123.05, the volume was absolutely ridiculous and futures prices got immediately dragged down.

The steadiness of the volatility curve should not be necessarily interpreted as a bullish signal because, in this case, the flattening of the market fluctuations rate is a direct consequence of a price action trading within a narrow range.

The HyperVolatility team is bearish Swiss Franc futures because the resistance point will be violated solely if strong macroeconomics news will come along. Additionally, the volatility curve should experience some short term movements which could favour a drop in futures prices towards the 120.5 – 121 area by the next Friday.

British Pound Futures Volatility Forecast (24/07/2011)

British Pound futures went through a very bullish week. The market opened at 160.3 on Monday, rallied to 161.1 on Tuesday, moved to 161.4 on Wednesday, jumped to 162.9 on Thursday and closed at 162.8 on Friday.

The current volatility is 0.05% (0.79% in annualised terms; believe it or not) and the TGARCH plot is clearly displaying a massive drop of the conditional variance which has been completely knocked down by the steady rise of futures prices.

Needless to say that, statistically speaking, the probability for the volatility curve to rise in the upcoming days is very close to 99% and such an augment in market fluctuations should end around the 0.4% – 0.45% area (6.3% – 7.1% in annualised terms).

Furthermore, the probable boost in market volatility is likely to push back down British Pound futures which already started to show some signs of weakness in the last 2 trading days.

The HyperVolatility team is bearish this market because the extreme low volatility is a clear warning signal: something in the market has now changed.

British Pound futures are likely to drop over the next trading days, favouring a recovery of the US dollar against Her Majesty’s currency, and it would not be surprising to see the price action to retest the 159 – 159.5 support level by the next Friday.

Japanese Yen Futures Volatility Forecast (24/07/2011)

Japanese Yen futures rallied sharply over the last 5 trading days because the market opened at 126.5 on Monday, dropped to 126.2 on Tuesday, jumped to 127.01 on Wednesday, settled at 127.5 on Thursday and closed at 127.4 on Friday.

The volatility is now 0.55% (8.7% annualised) and the TGARCH plot is displaying a fairly stable volatility curve which, although sensibly upward sloping, seems suggesting that the upcoming hours will see a moderate rate of market fluctuations.

On the other hand, it is worth pointing out that the price has now achieved the 127.4 level which has been touched only once in the last 2 years. Precisely, this strong resistance point was tested by investors soon after that terrible earthquake hit Japan and, although the “fundamental reason” was very strong, the price action got pushed back by central banks which wanted to prevent an excess of speculation.

The actual threshold will be very hard to break and, although the Japanese Yen keeps appreciating against the US dollar, it is likely that the price will fluctuate just below the 127.4 line in order to test market’s sentiment once again.

The volatility should remain low because the sideways movement of futures prices should keep the oscillation rate in the actual area but in the second half of the week there could be some short term explosions of the conditional variance which could possibly drag the price down.

The HyperVolatility team is bearish Japanese Yen futures, even if we expect a lateral movement of the price in the first 2 days of the next week, because the short term augment of volatility is likely to bring futures prices back down in the 125.5 – 126 area by the next Friday.

Euro Futures Volatility Forecast (10/07/2011)

The last week we forecasted a bearish movement of Euro futures whilst the suggested profit target for potential short positions was within the 1.4300 – 1.4350 and our analysis proved very profitable and reliable once again. Particularly, the market opened at 1.4497 dropped to 1.4387 on Tuesday, closed at 1.4283 on Wednesday, touched 1.4328 on Thursday and plummeted to 1.4226 on Friday: a great trade!!!

The actual volatility is 0.7% (11.1% annualised) and the TGARCH plot is visibly displaying a downward sloping curve highlighting that the conditional variance should probably diminish over the next trading hours. Consequently, a plummeting volatility is a signal that the bear movement of Euro futures ran out of steam and that the price action should now be able to recover.

Furthermore, the 1.4120 is a crucial level and, in the past, proved to be a fairly stable support which has been broken only after several attempts, which lasted even 2 weeks. Also, Euro futures recovered very quickly all the time they broke through the aforementioned threshold meaning that many investors and traders need a very good fundamental reason to keep shorting Euro at this point.

Moreover, many market participants should now decide which of the 2 most important currencies in the world is the one more jeopardised by the post-crisis effects: US or Europe?

Since the future does not appear to be sparkling for both US and EU, at least in the short term, investors and traders will have to decide which is the least painful between the hammer and the anvil.

The HyperVolatility team is moderately bullish Euro futures because the plummeting in the price action did not produce much variance meaning that many market participants did not close their long positions or at least did not reverse them, hence, we are expecting a low volatility environment which should push the price back into the 1.445 – 1.45 area by Friday.

Lately, under a macroeconomic point of view we think many investors got used to Portugal’s sovereign debt problems and Greece instability but the US disappointing job figures were not expected by so many people.

Swiss Franc Futures Volatility Forecast (10/07/2011)

We said we would enter the market solely if the volatility had surpassed the 0.78% level (12.3% annualised) and since the requirement was not satisfied we stepped aside and monitored the conditional variance all week long. Swiss Franc futures opened at 117.9 rose to 118.9 on Tuesday, closed at 119.1 on Wednesday, plummeted to 118.4 on Thursday and settled at 119.5 on Friday.

The current volatility is 0.62% (9.8% in annual terms) and the TGARCH plot is still showing a fairly stable curve which seems suggesting that no wild oscillations of the price action should be expected over the next trading days.

The impact that the Non-Farm Payroll announcement had on Swiss Franc futures was very predictable because when uncertainty hit equity markets many investors and traders turn to the Swiss currency to protect their portfolios and diversify their risk. We repeatedly said, in our previous analysis, that this market is considered to be a kind of safe haven for market participants and the rule proved to be valid once again.

The HyperVolatility team is moderately bullish Swiss Franc futures because the prolonged state of grace of the volatility curve should favour an ulterior rise of the price which is likely to break through the 120 resistance and test the 120.5 level by Friday.

Nevertheless, an augment in the conditional variance should be expected around the 120 level because many bears placed their short entries at this level, hence, the selling pressure could augment. Having said that, it is worth mentioning that should the conditional variance surpass the 0.68% – 0.7% area (10.7% – 11.1% annualised) we will revert our positions and look at the short side of the market.

British Pound Futures Volatility Forecast (10/07/2011)

The HyperVolatility team was right once again and our bearish forecast on British Pound futures proved very accurate and profitable. In fact, the market opened at 160.8, dropped to 159.8 on Wednesday, kept declining and touched 159.6 on Thursday but Friday’s macroeconomics news increased the buying pressure which brought back futures prices in the 160 area: we hope you all closed your position on Thursday because 159 was our suggested profit target.

The actual volatility is 0.6% (9.5% annualised) and the chart is manifestly showing an upward sloping curve which has now achieved one of the highest levels ever touched over the last 5 months.

Consequently, a drop of the conditional variance should be the most probable scenario over the next trading days because, although a shy augment of the volatility could occur in the first 2 days of the week, the mean reverting process will “attempt” to push the oscillation rate towards the 0.35% – 0.4% area (5.5% – 6.3% in annual terms) which is the long term equilibrium point for this market.

The HyperVolatility team is bullish British Pound futures because the plummeting of volatility and the fact that the 159.5 – 160 threshold is probably the strongest support/resistance level for this pair, should push traders and investors to buy US dollars rather than Her Majesty’s currency.

Furthermore, the great panic that the Non-Farm Payroll announcement generated and the fact the US dollar kept appreciating against Pound sterling for almost 3 months are really warning signals because all the shorts are likely to be closed around this level implying an ulterior augment of the buying pressure.

Japanese Yen Futures Volatility Forecast (10/07/2011)

The last week we were bearish Japanese Yen futures and 122.5 – 123 area was the profit target we were looking forward to. The market opened at 123.88 dropped to 123.63 on Wednesday and plummeted to 123.18 on Thursday, however, the great volatility which hit Friday’s trading session pushed the price back into the 124.09 zone.

The volatility is now 0.5% (7.9% annualised) and the TGARCH plot is showing a fairly stable curve which is trading close to the long term equilibrium point that is identifiable within the 0.45% – 5% zone (7.1% -7.9% in annual terms).

Japanese Yen futures, on Friday, rose sharply because of the bad job figures reported in the Non Farm Payroll and the consequent increase in the US unemployment pushed many investors away from American stocks, indices and its currency. As a consequence, most of them turned to the Japanese Yen boosting the buying pressure which pushed the price all the way up to 124.

On the other hand, it is worth noting that the violent drop in price which characterised all the week, let alone Friday’s event, did not produce much volatility. The same thing happened on Friday because the very last part of the volatility curve does not show any short term explosion.

The HyperVolatility team is moderately bearish on Japanese Yen futures because the price should retrace and test the 123 support once again over the next trading hours. Nevertheless, the price plummet should not be very powerful because the drop in volatility has been mainly caused by a sideways movement of the price and we think the next week is going to present the same scenario.

Euro Futures Volatility Forecast (04/07/2011)

Euro futures rallied sharply throughout the entire week despite our bearish view because the Greek parliament approved the austerity package which, in turn, will bring ulterior cash injections in the country via a further bail-out plan sponsored by the European Union and the IMF. Nevertheless, we clearly stated that more macroeconomics news would have kept us away from this market and we closed our positions as soon as we noticed that the panic started to spread in the market.

Euro futures opened at 1.4246, rallied to 1.4334 on Tuesday, broke through the 1.44 threshold on Wednesday and managed to remain in a relatively high area because 1.4472 was the closing price on Thursday whilst 1.45 was Friday’s settlement: the Single currency heavily appreciated against the US dollar.

The actual volatility is 0.64% (10.1% annualised) and the TGARCH curve is obviously going through a period of relative calmness and tranquillity implying that the big appreciation of the Single currency against the greenback was fairly steady.

The HyperVolatility team is moderately bearish on Euro futures but we recon that a sideways movement is going to be the dominant “feature” of the price action in the next hours.

However, should the volatility surpass the 0.7% – 0.71% threshold (11.1% – 11.2% in annual terms) we would enter some shorts because the 1.45 resistance will hardly be broken and many bears will try to take advantage from such an event. Additionally, we think that the great rally is likely to be followed by a short term retracement which would push the price back into the 1.4300 – 1.4350 area but the aforementioned scenario is more likely to happen in the second half of the week.

Swiss Franc Futures Volatility Forecast (04/07/2011)

The last week we warned our readers against a drop of Swiss franc futures because, in our opinion, the 120 resistance point would have been a too strong psychological level to surpass and effectively so it was. Furthermore, we forecasted that the drop would have been a significant one with the price action ending the week in the 117.5 area and the HyperVolatility team was right once again.

Particularly, Swiss Franc futures dropped throughout all the week. In fact, the market opened at 119.7 on Tuesday, retested the 120 threshold on Tuesday but did not manage to break through it and started to drop until Friday. Specifically, 119.9 was the closing price on Wednesday whilst 119.02 was the settlement on Thursday and 117.9 the Friday’s closing price.

The volatility is now at 0.7% (11.1% annualised) but the TGARCH plot is clearly displaying an extremely flat curve which implies the fact that the price drop we saw the last week was extremely weak. Particularly, such a phenomenon is a warning signal because, as you can see from the chart, the conditional variance did not move at all despite of the big plummet in futures prices.

The HyperVolatility team will probably remain flat this week because the price is likely to move sideways all week long. However, a short term explosion of the volatility could potentially bring futures prices back into the 116 – 116.5 area but we would enter a short position only the conditional variance is going to surpass the 0.78% point (12.3% in annual terms).

British Pound Futures Volatility Forecast (04/07/2011)

The HyperVolatility team was right once again. In fact, the last week we were bullish British Pound futures and our profit target was set at 162 – 162.5 and although the market did not reach that point our projection proved extremely reliable and profitable.

Particularly, British Pound futures opened at 159.7 on Monday but they suddenly rose to 160.5 on Wednesday and, although the market moved sideways on Thursday, where 160.3 was the closing value, the price managed to move even higher and settle at 160.5 on Friday

The current volatility is 0.44% (6.9% in annual terms) and the TGARCH curve is visibly upward sloping implying that the mean reverting process of the volatility is not over yet because the conditional variance, during the next days, will try to settle around the 0.52% area (8.2% annualised) which is the equilibrium point.

The great depreciation of the US dollar against the Pound sterling clearly played a central role over the last week but the comforting news coming from Greece helped almost all European currencies to appreciate against the greenback.

On the other hand, the augment in volatility is a quite probable occurrence because the curve will probably settle around the 0.5% level (7.9% annualised) dragging down Pound futures in the 159 area by Friday.

The HyperVolatility team is moderately bearish British Pound futures but the down move should not aggressive or violent but rather constant and continuous although the breakthrough of the 160 support could push the conditional variance up again.

Go back to top