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E-Mini Crude Oil Futures Volatility Forecast (29/05/2011)

The great depreciation of the US dollar affected not only the “remaining” currencies but it inevitably influenced crude oil prices. Specifically, the market opened at $ 97.5 retested the $ 101 threshold on Wednesday but E-Mini Crude Oil futures did not manage to break through this level and kept moving sideways for the rest of the week. In fact, on Thursday the closing price was $ 100.3 whilst $ 100.7 was the last price print on Friday.

The current volatility is 1.5% (23.8% in annual terms) and the TGARCH plot is still displaying a downward sloping curve which is probably going to settle around the equilibrium point which, in this case, is stable around the 1.1% – 1.2% level (17.4% – 19% annualised).

The sharp and violent depreciation of the American currency and the slightly increased demand (particularly from China and India) have been the most influential market movers the last week and that is precisely why E-Mini Crude Oil futures rallied and achieved the $101 threshold.

However, the conditional variance should not augment over the next trading days and it is probable that the beginning of the next week will see a sideways movement of futures prices followed by an ulterior surge.

The HyperVolatility team is bullish E-Mini Crude Oil futures because the diminishing oscillation rate should back the price action which should retest the $ 103 – 104 area by the next Friday.

Furthermore, the violent depreciation of the US dollar is going to act as a catalyst and consequently many investors and traders will “use” it to earn extra profits.

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