British Pound Futures Volatility Forecast (14/08/2011)

The HyperVolatility team was bearish British Pound futures and we were expecting the market to retrace sharply and retest the 161.5 area and on Wednesday our profit target was successfully achieved. Specifically, British Pound futures opened at 163.3 on Monday, touched 163.12 on Tuesday, dropped to 161.32 on Wednesday, achieved 162.22 on Thursday and closed at 162.75 on Friday.

The actual volatility is 0.43% (6.8% annualised) whilst the chart is showing an upward sloping curve which seems suggesting that, over the next trading days, an increase in the fluctuation rate should be expected. Furthermore, it is interesting to notice that the conditional variance plummeted quite sharply, although the market retraced rather violently in the first 2-3 days of the last week, implying a positive correlation between British Pound futures and their volatility.

The US dollar should probably keep appreciating against Her Majesty’s currency because investors will try to “secure” their capitals for one more week before getting back to riskier markets.

The HyperVolatility team is bearish British Pound futures because the augment in the oscillation rate should hit prices in the upcoming week. It would not be surprising to see the market to retrace and test the 160 support by Friday.

On the other hand, should equity markets move sharply up, over the next days, British Pound could eventually head north and touch the 163.5 – 164 level.

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