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Swiss Franc Futures Volatility Forecast (05/10/2011)

Swiss Franc futures opened at 111.06 on Monday, touched 111.64 on Tuesday, settled to 111.48 on Wednesday, remained around 111.55 on Thursday and sharply dropped to 110.47 on Friday.

The actual volatility is 0.74% (11.7% in annaul terms) and the TGARCH plot is now showing an extremely flat curve which would probably remain around this level over the next trading days. However, the great steadiness of the curve and the extended bear movement of the volatility could easily lead to short term bursts of the fluctuations rate and consequently to an augment of the buying pressure.

The HyperVolatility team is moderately bullish Swiss Franc futures because it is likely that the oscillation rate will augment over the next trading hours pushing the price action towards the 111.8 – 112 area before Friday.

Nonetheless, extra care should be taken when trading this market because the Swiss authorities are closely monitoring the exchange rate in order to prevent an ulterior sharp appreciation from happening.

Swiss Franc Futures Volatility Forecast (27/09/2011)

Swiss Franc futures opened at 112.8 on Monday and remained stable at this level on Tuesday but on Wednesday the price hit 111.4 whilst it plummeted to 110.4 on Thursday and settled at 110.7 on Friday.

The actual volatility is 1% (15.8% in annual terms) and the TGARCH curve is still showing a persistent lateral movement which is probably going to last in the upcoming days because the heavy intervention of the Swiss Central bank  scared away many investors who were,instead, seeking protection.

Swiss Franc futures is now an almost dead market. The intervention of the Swiss monetary authorities poised the price action and the massive drop in volatility is simply the natural consequence of the aforementioned equilibrium distortion.

The HyperVolatility team is slightly bullish Swiss Franc futures because the low volatility environment should support the price action which could potentially retest the 112 -113 threshold by Friday. However, any large move on the upside will be heavily arbitraged away from the Swiss Bank giving a great arbitrage opportunity to traders who will look to short Swiss Franc futures should they move too further away.

Overall, the week should see a large lateral movement of the price action with very short term movements,potentially  on the upside, that are not going to distort the price action that much.

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.

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.

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.

Swiss Franc Futures Volatility Forecast (22/08/2011)

The bearish view we shared one week ago has been partially confirmed because, although the market plummeted in the first half of the week due to the concerns regarding the Swiss Central Bank’s intervention, the bad news coming both from the macroeconomics and political worlds pushed investors to buy back the Swiss currency.

Swiss Franc futures opened at 127.6 on Monday, dropped to 126.2 on Tuesday, jumped to 126.8 on Wednesday, plummeted to 126.1 on Thursday and achieved 127.4 on Friday.

The actual volatility is 1.1% (17.4% annualised) and the TGARCH plot is visibly displaying a curve that is now moving sideways after having touched the 2% threshold (31.7% in annual terms) which is its five months high. Furthermore, the mean reverting process of the conditional variance seems to be somehow interrupted implying that the next trading days could still see a high degree of market fluctuations.

The HyperVolatility team is bearish Swiss Franc futures because the continuing intervention of the Swiss Central Bank and a probable increase in the conditional variance should drive the price action back down in the 125 area by Friday.

On the other hand, bad macroeconomics news and an ulterior drop in equity markets would augment the buying pressure and futures prices would skyrocket and touch the 129 threshold by the end of the next week.

Swiss Franc Futures Volatility Forecast (14/08/2011)

The HyperVolatility team was right once again because the last week we forecasted a break through of the 128.5 – 129 level and the market opened well above that level. Swiss Franc futures opened at 132.64, jumped to 139.03 on Tuesday, retraced to 137.85 on Wednesday, dropped to 131.21 on Thursday and closed at 128.64 on Friday.

The actual volatilty is 1.59% (25.2% annualised) and the TGARCH plot is manifestly displaying an out-of-order situation in which the conditional variance has touched its higest level in 5 months. Moreover, it is clear that the volatility already commenced its mean reverting process but, in this case, we are looking at an inverse leverage effect where a volatility decrease is accompanying a plummeting price rather than an up move.

The intervention of the Swiss Central Bank started to have some effects on its currency futures since Wednesday onwards, however, we believe that most of the investors started to fear this market because it is clearly overbought and its volatility exploded on the upside although the market is in a robust uptrend.

The HyperVolatility team is bearish Swiss Franc futures because the inverse correlation between the price and its volatility will tend to get back to normal only in the medium term implying that an ulterior plunge of market fluctuations is going to go along with a dropping price. We believe that Swiss Franc futures will probably touch the 124 – 124.5 support by Friday.

It is worth adding that even this market is highly exposed to macroeconomics news meaning that further negative figures would push the price back into the 135 – 137 area.

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

Needless to say that the massive sell-off that interested financial markets pushed all investors to seek some sort of safe asset and we know that the Swiss Franc is one of those. In fact, Franc futures opened at 127.7 on Monday, touched 130.7 on Tuesday, plummeted to 130.1 on Wednesday, rose to 130.3 on Thursday and closed at 130.6 on Friday.

The actual volatility is 0.43% (6.8% annualised) and the TGARCH plot is displaying a slightly upward sloping curve, although the conditional variance experienced an aggressive drop due to the sharp buying pressure which hit the Swiss Franc futures.

The volatility should head north in the upcoming days and mean revert towards the 0.6% level (9.5% annualised) but such an increase in the market fluctuation rate should be only a temporary one because many investors, frightened by what happened last week in equity markets, will seek security in the Swiss country.

The Swiss Central bank adopted some drastic measures to depreciate its national currency but the intervention did not meet central bankers’ expectation and since the panic is still high we believe that the situation will remain almost unchanged.

The HyperVolatility team remains bullish Swiss Franc futures, although a short term drop is highly probable in the first half of the week, and we think that futures prices will first plunge to 128.5 – 129 and then retest the 131 area by Friday. Consequently, the volatility will rise in the first 1-2 days of the week and then remain constant or eventually drop back as we approach the weekend.

Swiss Franc Futures Volatility Forecast (02/08/2011)

Swiss Franc futures opened at 124.1 on Monday, moved to 124.8 on Tuesday, settled at 124.8 on both Wednesday and Thursday whilst 127.2 was the closing price registered on Friday.

The volatility is now 0.6% (9.5% annualised) and the TGARCH plot is displaying an upward sloping curve which seems to have completed its mean reverting process. The volatility of the Swiss Franc is trading within its long term equilibrium point implying that the next trading days will see a softening of the conditional variance and a consequent decrease of the risk associated with unexpected price jumps.

Swiss Franc futures managed to break through the 126 threshold last week and, as mentioned in the British Pound forecasts, the price is now trading in an unknown territory. Specifically, the Swiss currency has never appreciated so much against the US dollar but the need for security attracted many investors towards this market as it always considered being a kind of safe haven during rough waters.

The HyperVolatility team is bearish Swiss Franc futures because a short term retracement accompanied by an increasing volatility should drag the price back down in the 124 area.

Nevertheless, bad macroeconomics news and unexpected events could push investors to protect their portfolios by going long the Swiss currency once again and therefore it is worth watching very closely the economic calendar.

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.

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