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Euro Futures Volatility Forecast (10/04/2011)

The last week we were bullish on Euro futures since our analysis suggested a further rise of the price which would have achieved the 1.435 area. Once again our forecast proved accurate and precise: the market opened at 1.4199 settled around 1.428 and rallied to 1.446 on Friday. A great trade!!!

The actual volatility is around 0.55% (8.7 annualised) but the TGARCH curve seems suggesting that the next week should not be as volatile as we thought in the first place. Specifically, we believe that the volatility is too low and that an increase in the conditional variance will soon drag down Euro futures prices but the actual stability of the plot highlights the will of many investors to retest the 1.50 resistance level.

The HyperVolatility team remains bullish on Euro futures because the volatility should not augment whilst prices are going to head north once again and achieve 1.455 – 1.46 by the end of the next week. Nevertheless, the 1.45 level could be a strong resistance level and great attention will be necessary when the market is going to get near a breakthrough of that barrier.

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