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Euro Futures Volatility Forecast (21/03/2011)

Euro futures dropped to 1.39 as we correctly forecasted the last week but as the USA announced its military commitment against Libya investors decided to put their trust and money on the European currency rather than the greenback and this caused the sharp surge in price we saw on Thursday and Friday.

The TGARCH plot is now fluctuating around 0.7% (11.1% annualised) and although slightly upward sloping, the curve got back to the equilibrium point. Consequently, we could see a small appreciation of the single currency against the US dollar but the overall week should not present shocking movements, news permitting.

Furthermore, over the next days the Euro futures should rise to 1.42 and then drop back into the 1.405 – 1.41 area.  The staff of HyperVolatility will closely monitor this market but we will not place any longs because the up move is quite close to be over and consequently we would be happier to take advantage of a short term retracement which could lead to some extra returns.

Should the above mentioned scenario change we will remain flat and monitor volatility movements whilst waiting for the next week.

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