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Swiss Franc Futures Volatility Forecast (19/09/2011)

Swiss Franc futures opened at 113.4 on Monday, rose to 113.6 on Tuesday, jumped to 114.1 onWednesday, achieved 115 on Thursday and settled at 114 on Friday.

The actual volatility is 0.81% (12.8% in annual terms) and the chart is manifestly signalling that the Swiss Bank intervention managed to prevent its currency from appreciaitng too much. However, the big drop in market fluctuations has been followed by a sideways movement of  the conditional variance whose curve is now slightly upward sloping but the situation is likely to remain so even during the next hours.

The intervention of the Swiss National Bank “distorted” the price action and the massive drop in price scared away many investors which are now reluctant to place large buy orders although the Swiss Franc stadily remains one of sa havens during equity market turmoils.

The HyperVolatility team is moderately bullish on Swiss Franc futures because a short term increase of the price is likely to occur even though there is a high probability of sideways movements. Hence, we believe that the 115 -116 threshold will be retested before Friday but a break through this level is quite unlikely because the concerns about an ulterior interference of the Swiss monetary authority would augment.

British Pound Futures Volatility Forecast (19/09/2011)

British Pound futures opened at 158.4 on Monday, dropped to 157.77 on Tuesday, closed at 157.71 on Wednesday, jumped to 158 on Thursday and settled at 157.9 on Friday.

The current volatility is 0.54% (8.5% in annual terms) but the volatility curve seems to have reached a mean reverting point and it looks like that the upcoming trading days will probably see a softening of market fluctuations. However, British Pound futures went through a bearish week, that caused the conditional variance to increase, and the fact that the volatility is now ready to decrease is signalling that the down move is likely to be over.

The fact that the conditional variance is still high means that some short term bursts are still possible, however, the overall week should see British Pound futures in a shy uptrend. Consequently, the 1.60 area could be eventually retested by the end of the week.

Finally, the FOMC statement on Wednesday remains the key event of the week and should be carefully monitored.

Japanese Yen Futures Volatility Forecast (19/09/2011)

Japanese Yen Futures opened at 129.1, rose on 130 on Tuesday, touched 130.45 on Wednesday, achieved 130.48 and closed at 130.1 on Friday.

The volatility is now 0.51% (8% annualised) and the TGARCH plot is showing a slightly upward sloping curve which seems to suggest that the upcoming trading hours will see an increase in the fluctuations rate which a consequent drop of the price action.

The concerns about Europe and the great uncertainty surrounding the destiny of Greece , which seems to be really on the brink of collapse, would probably push investors towards safe haven again, if they have ever left them at all, implying that the buying pressure could augment and lift Japanese Yen futures as well as the volatility curve.

The HyperVolatility team is bullish Japanese Yen futures because the symmetric effect between volatility and price action during turmoil is an indication that the buyers will probably get back into the game and purchase some more assets in order to diversify the risk of their portfolios. Hence, we believe that futures prices should increase and eventually retest the 132 threshold by Friday.

The FOMC statement on Wednesday could potentially change the picture should new monetary policies being released.

Euro Futures Volatility Forecast (06/09/2011)

Euro futures opened at 1.4504 on Monday, plunged to 1.4439 on Tuesday, settled at 1.437 on Wednesday, plummeted to 1.4267 on Thursday and closed at 1.4193 on Friday.

The actual volatility is 0.73% (11.5% in annual terms) and chart is evidently showing an aggressively upward sloping volatility curve which seems to suggest that a higher degree of market fluctuations should be expected in the upcoming hours. Unlike British Pound futures the plunge in Euro futures prices has been accompanied by a large selling pressure which inevitably lifted the conditional variance.

The concerns about the diminished growth in Europe in addition to the problems connected to the sovereign debt crises are going to augment the selling pressure in the short term.

The HyperVolatility team is bearish Euro futures because the conditional variance should rise in the short term whilst the price action is likely to retest the 1.3900 – 1.4000 area by Friday.

Swiss Franc Futures Volatility Forecast (06/09/2011)

Swiss Franc futures opened at 122.5 on Monday, plunged to 121.9 on Tuesday, rose to 124.1 on Wednesday, achieved 125.8 on Thursday and closed at 126.7 on Friday.

The actual volatility is around 1.3% (20.6% in annual terms) and the TGARCH plot is manifestly showing an upward sloping curve which seems to suggest that the buying pressure has not calmed down yet and therefore likely to continue over the next trading days. The conditional variance is still trading in a very high range and an ulterior increase in could potentially push the curve towards the 1.8% threshold (28.5% annualised) which have been touched a few weeks ago.

Many investors are still buying the Swiss Franc in order to diversify their portfolios and limit their risk. The volatility,during market turmoils, tend to move symmetrically to prices and consequently an ulterior burst in the conditional variance should be interpreted as a long signal.

The HyperVolatility team is bullish Swiss Franc futures because the buying pressure should augment over the next hours and possibly bring the price action towards the 130 – 131 level again.

However, the Swiss Bank is trying to depreciate its currency once again by selling Swiss Francs in the secondary market and extra care should be taken when trading this market.

British Pound Futures Volatility Forecast (06/09/2011)

British Pound futures opened at 164 on Monday, plummeted to 162.8 on Tuesday, plunged to 162.4 on Wednesday, settled at 161.8 on Thursday and closed at 162.1 on Friday.

The current volatility is 0.51% (8% in annual terms) and the TGARCH plot is displaying a steady volatility curve whose inclination is neither upward nor downward sloping. However, the absence of short term explosion of the conditional variance looks a bit suspicious if compared to the price action that has been plummeting all week long.

There is clearly a violation of the leverage effect process going on because the volatility is not reflecting the actual market conditions. Usually, such a mismatch is a warning signal and it tends to precede drops in the price action.

The HyperVolatility team is bearish British Pound futures because an increase in the conditional variance should now accompany a plunge in futures prices which are likely to retest the 158 – 159 area by Friday.

Japanese Yen Futures Volatility Forecast (06/09/2011)

Japanese Yen futures opened at 130.1 on Monday, rose to 130.4 on Tuesday, jumped to 130.5 on Wednesday, dropped to 130 on Thursday and closed at 130 on Friday.

The volatility is trading around the 0.5% area (7.9% annualised) and the TGARCH plot is now displaying a slightly upward sloping curve which seems to announce a short term increase in the conditional variance although the overall chart shows a fairly stable curve.

The Bank of Japan is still trying to force its currency down in order to counterbalance the massive buying pressure generated by the sell-off in equity markets and by the increased concerns regarding the sovereign debt problems in Europe.

The HyperVolatility team is bullish on Japanese Yen futures because the volatility chart does not seem to present any sign of sharp retracements. Additionally, it is important to point out that the explosion in volatility, at least in the last months, have been caused by an enormous buying pressure rather than a market drop because, as we all know, the Japanese currency is considered to be a safe haven by investors and traders. We are expecting futures prices to skyrocket and achieve the 132 – 133 area by Friday.

Euro Futures Volatility Forecast (30/08/2011)

Euro futures opened at 1.4358 on Monday, rose to 1.4441 on Tuesday, retraced to 1.4410 on Wednesday, jumped to 1.4376 on Thursday and closed at 1.4491 on Friday.

The actual volatility is 0.71% (11.2% in annual terms) and the TGARCH plot is displaying a stable volatility curve, although sensibly upward sloping, which seems suggesting that in the upcoming hours the market should not experience big jumps or sudden volatility bursts. Clearly, there could be some short term retracements but, even in this market, the mean reverting process tends to be very quick and powerful implying that all “odd moves” are likely to get averaged out.

The HyperVolatility is bullish Euro futures because the conditional variance should not augment in the short term and the price action should move upward over the next trading days. Consequently, futures prices should retest the 1.50 threshold by the end of the week although some short term drops are quite likely to occur but their impact should not be significant in the medium term.

 

Swiss Franc Futures Volatility Forecast (30/08/2011)

Swiss Franc futures opened at 126.6 on Monday, dropped to 126.3 on Tuesday, plunged to 125.9 on Wednesday, settled at 126.1 on Thursday but closed at 124 on Friday.

The actual volatility is 0.9% (14.2% annualised) and the TGARCH plot is now showing a fairly stable volatility curve which almost completed its mean reverting journey towards the 0.65% – 0.7% threshold (10.3% – 11.1% in annual terms). The big spike in the conditional variance has been caused by the massive buying pressure which hit the Swiss currency during the sell-off in equity markets and the volatility is now moving following an inverted leverage effect implying that an ulterior softening of the oscillation rate could accompany a slow decrease in Swiss Franc futures prices.

The HyperVolatility team is bearish this market because the symmetry between the price action and its volatility is likely to continue over the next trading hours implying a down move of futures prices which could potentially touch the 120 support level before Friday.

However, it is worth reminding that a great deal of macro news is going to be released between Thursday and Friday and should the data be bearish Swiss Franc futures could jump back up again and eventually retest the 130 threshold before the end of the week.

British Pound Futures Volatility Forecast (30/08/2011)

British Pound futures opened at 164.6 on Monday, rose to 164.9 on Tuesday, dropped to 163.6 on Wednesday, plummeted to 162.8 on Thursday and closed at 163.6 on Friday.

The actual volatility is 0.51% (8% in annual terms) and the TGARCH chart is showing again a fairly stable volatility curve which is obviously trading within its long term equilibrium point. Also, the mean reverting speed is fairly high because every spike far from the mean gets quickly annulled by an offsetting movement of the conditional variance. The steadiness rate of the curve should probably remain unchanged even in the upcoming days and there should not be big jumps or unexpected large volatility bursts; although some very short term retracements are inevitable.

Consequently, the dollar should keep depreciating against British Pound even in the next hours, macroeconomics news permitting.

The HyperVolatility team remain bullish British Pound futures because the conditional variance should not change dramatically and such a phenomenon should back the price action which should eventually retest the 165.5 – 166 area by Friday.

However, some sideways movements around the resistance point placed at 165 are quite likely to happen but the accumulation period, ceteris paribus, should be followed by a break out of the aforementioned level.

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