Euro Futures Volatility Forecast (10/05/2011)

The HyperVolatility team was right once again!!! Euro futures were expected to fall sharply because the continuous depreciation of the US dollar had pushed the volatility to a level which was no longer acceptable: a retracement was very much needed.

The market opened at 1.4806 and traded within this level for almost 3 days before dropping violently on Thursday, whose closing price was 1.4519, whilst 1.4323 was the final price registered on Friday.

The current volatility is around 0.8% (12.7% annualised) and the curve is now upward sloping but the actual conditional variance achieved its highest point in 4 months and it is quite probable that the upcoming days will see a mean reverting process which will irremediably push the variance towards 0.6% (9.5% in annual terms).

The HyperVolatility team is bullish on Euro futures because the volatility should decrease whilst futures prices are going to head north once again and retest the $ 1.48 – 1.49 threshold. However, should the volatility surpass 0.85% (13.4% annualised) we would probably look to sell in the very short term.

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