British Pound Futures Volatility Forecast (13/06/2011)

British Pound futures began a very bullish week by jumping to 164.5 on Tuesday, in fact the last week we forecasted an up move, but the great uncertainty brought by negative macroeconomics news provoked the US dollar to appreciate against all the major currencies. Particularly, as soon as equity indices began to drop British Pound futures touched 163.9 on Wednesday and closed at 162.2 on Friday.

The volatility curve is now at 0.46% (7.3% annualised) and its slope seems suggesting a further augment of the conditional variance over the next trading days although the current reading are still within a fairly stable range since a breakthrough of the 0.52% threshold (8.25% in annual terms) did not occur.

Nevertheless, the fact that the oscillation rate surged during the plunge that hit the market the last week means that a retracement was expected by many investors and if we consider that the 165 level has been touched 3-4 times since the beginning of May without a definite breach it is evident that this level is a strong resistance point.

The HyperVolatility team remains bearish on British Pound futures because the volatility curve will probably augment again over the last trading days whilst futures prices are likely to bounce back into the 160.7 – 161 zone by the next Friday.

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