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Euro Futures Volatility Forecast (18/04/2011)

Euro Futures were expected to move higher and effectively so it was until the last Thursday when the last attempt to break through the 1.45 resistance failed. However, our forecast proved profitable once again because we warned our reader against a possible retracement in this area and therefore we all hope you benefited from our analysis and closed your longs on Thursday.

The current volatility is around 0.48% (7.6% in annual terms) but the curve seems highlighting an ulterior increase of market fluctuations over the next trading days.

Particularly, the conditional variance has been decreasing constantly over the past 5 months and therefore we expect an explosion in volatility any time soon because the actual situation is quite unstable in the short term and not sustainable in the long run.

Consequently, we believe that the volatility will achieve the 0.55% – 0.58% area (8.7%- 9.2% in annualised terms) by the next week pushing Euro futures towards the 1.428 – 1.43 zone.

The HyperVolatility team is bearish on Euro futures and we will place some short positions as soon as the market is going to open. There might be a small chance that Euro futures will test the 1.448 in the first hours but next week should be quite volatile, hence, bearish.

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