Euro Futures Volatility Forecast (02/08/2011)

Euro futures opened at 1.4356 on Monday, moved to 1.4486 on Tuesday, plummeted to 1.4346 on Wednesday, settled at 1.4297 on Thursday and closed at 1.4368 on Friday.

The actual volatility is 0.68% (10.7% in annual terms) and the TGARCH chart is clearly showing a curve which has now completed its mean reverting process and it is not trading within its long term equilibrium point although still upward sloping.

Euro futures are trading just below the resistance placed at 1.4500 – 1.4550 and a breakthrough of this important psychological point could be possible in the near future but in order to remain above the aforementioned threshold the next news regarding the US economy such as NFP and unemployment should be very bearish causing the US dollar to depreciate even more against the Single currency.

The HyperVolatility team is bullish the Euro futures market because the steadiness of the volatility plot should be a good indicator for the robustness of the uptrend we all saw since the beginning of July. Consequently, the price action should keep rising and eventually touch 1.4580 by Friday.

Nevertheless, some short term explosions of the conditional variance could alter the picture but the overall trend should remain unchanged and therefore bullish.

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