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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.

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