Euro Futures Volatility Forecast (15/05/2011)

The US dollar kept appreciating against the European currency because the volatility broke through the 0.7% (11.1% annualised) and the bearish week opened at 1,4345 plummeted to 1,4187 whilst 1,4089 was the closing price registered the last Friday.

The actual volatility is 0.87% (13.8% in annual terms) and, although the TGARCH curve seems highlighting a potential drop of the oscillation rate, the conditional variance did not decrease sharply as it usually happens when the down move runs out of steam after a significant price drop: meaning that the down move is not over yet.

Consequently, the next week should see a potential augment of the conditional variance which could even achieve the 0.9% – 0.93% level (14.2% – 14.7% in annual terms) by the end of the week whilst futures prices should continue to plummet although the 1.40 – 1.405 area could be a solid support.

The HyperVolatility team is bearish on Euro futures and we believe that an initial plunge in futures prices, accompanied by a short term rise in volatility, should be the major move in the upcoming trading days.

However, it is quite likely that futures prices, once achieved the 1.40 support, will start moving sideways until the next Friday.

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