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British Pound Futures Volatility Forecast (30/08/2011)

British Pound futures opened at 164.6 on Monday, rose to 164.9 on Tuesday, dropped to 163.6 on Wednesday, plummeted to 162.8 on Thursday and closed at 163.6 on Friday.

The actual volatility is 0.51% (8% in annual terms) and the TGARCH chart is showing again a fairly stable volatility curve which is obviously trading within its long term equilibrium point. Also, the mean reverting speed is fairly high because every spike far from the mean gets quickly annulled by an offsetting movement of the conditional variance. The steadiness rate of the curve should probably remain unchanged even in the upcoming days and there should not be big jumps or unexpected large volatility bursts; although some very short term retracements are inevitable.

Consequently, the dollar should keep depreciating against British Pound even in the next hours, macroeconomics news permitting.

The HyperVolatility team remain bullish British Pound futures because the conditional variance should not change dramatically and such a phenomenon should back the price action which should eventually retest the 165.5 – 166 area by Friday.

However, some sideways movements around the resistance point placed at 165 are quite likely to happen but the accumulation period, ceteris paribus, should be followed by a break out of the aforementioned level.

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