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British Pound Futures Volatility Forecast (15/05/2011)

Once again our forecast proved extremely profitable and quite accurate. In fact, the British Pound collapsed throughout the last week, as expected, whilst the volatility rose and achieved the 0.55% (8.7% annualised) which is exactly the figure we gave you 1 week ago.

In practical terms the market opened at 163.8 dropped at 163.4 on Wednesday but the down move continued at a stable rate because162.8 was the closing price on Thursday whilst it touched 161.7 on Friday.

The current volatility is around 0.55% (see above) and the TGARCH curve seems suggesting that a very short term sideways movement of market fluctuations could occur at the beginning of the next week.

On the other hand, the conditional variance has now achieved its highest level in 5 months but the chart still displays an upward sloping curve which highlights the fact that the appreciation of the US dollar against the Pound Sterling is far from being over.

The HyperVolatility team remains bearish on British Pound futures because we believe that the market is going to experience more volatility over the next trading days.

Specifically, the volatility should increase again and eventually touch 0.59% – 0.61% (9.3% – 9.6% in annual terms) whilst futures prices should drop and settle in the 160 – 160.5 area by the next Friday.

However, a bit of a sideways play at the beginning of the week should not be a surprising event.

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