E-Mini Crude Oil Futures Volatility Forecast (24/04/2011)

The last week we were bullish on E-Mini Crude Oil futures and our analysis proved both useful and profitable since the $ 110 target was abundantly surpassed. In fact, futures prices opened at $ 107.1 rose to $ 111.4 on Wednesday but the $ 112.2 was a really pleasant surprise.

The chart shows an upward sloping curve which is now at 2.1% (33.3% annualised) and it is probably going to rise even more over the next trading days dragging down E-Mini Crude Oil futures prices.

Furthermore, the analysis we ran on Euro futures is now suggesting that, at least in the short term, the US Dollar will appreciate against the European currency and, should our forecast be correct, this phenomenon would act as a catalyst for the plummet of oil prices.

The tensions in Libya seems to be less of a problem now and many investors appear to be more concerned about the Euro vs Dollar exchange than anything else. In fact, the news coming from US regarding the rising Federal debt managed to drive down the market quite sharply the last week and this caused the spot rate to hit the $ 1.45 level.

The HyperVolatility team is moderately bearish on E-Mini Crude Oil futures because prices should head south and eventually hit $ 109.5 – 100 by the end of the next week. Consequently, we will place some shorts as soon as possible but should the volatility curve drop and touch the 1.8% area (28.5% annualised) we would probably look for long opportunities.

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