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Euro Futures Volatility Forecast (14/03/2011)

The Euro is still rising and the market achieved the $ 1.395 area even if euro futures did not manage to break through the solid resistance placed at $ 1.4.

The week seemed to be a bearish one but the price found a concrete support at $ 1.38 and jumped back up to $ 1.39 highlighting that many investors and traders are probably willing to re-test the $ 1.40 and check if there is any concrete possibility for a break out.

The actual volatility is 0.77% (12.2% annualised) and the upward sloping curve seems to indicate a further rise in the market fluctuations rate over the next trading days.

Consequently, more volatility is going to be expected over the next days and this could drive the market down towards the $ 1.37 area because the last rise in the TGARCH curve was caused by an increase in price. Therefore, such a scenario should mean that the boost is not as strong as it might seem.

The staff of HyperVolatility is moderately bearish on Euro futures and we will probably wait until Tuesday to place the trade because we will see how the market is going to react to Japan’s earthquake. Furthermore, the great concerns surrounding the Asian markets could drive investors to buy US dollars and, should this be the case, the euro would be inevitably dragged down in the $ 1.365 – 1.37 zone.

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