Euro Futures Volatility Forecast (06/09/2011)

Euro futures opened at 1.4504 on Monday, plunged to 1.4439 on Tuesday, settled at 1.437 on Wednesday, plummeted to 1.4267 on Thursday and closed at 1.4193 on Friday.

The actual volatility is 0.73% (11.5% in annual terms) and chart is evidently showing an aggressively upward sloping volatility curve which seems to suggest that a higher degree of market fluctuations should be expected in the upcoming hours. Unlike British Pound futures the plunge in Euro futures prices has been accompanied by a large selling pressure which inevitably lifted the conditional variance.

The concerns about the diminished growth in Europe in addition to the problems connected to the sovereign debt crises are going to augment the selling pressure in the short term.

The HyperVolatility team is bearish Euro futures because the conditional variance should rise in the short term whilst the price action is likely to retest the 1.3900 – 1.4000 area by Friday.

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