Euro Futures Volatility Forecast (27/03/2011)

Our forecasts gave us a bearish view on Euro futures and we were expecting the price to hit 1.405 – 1.41 and so it was. Specifically, the market opened at 1.42 but it then plummeted to 1.41 and fluctuated within a narrow range until the end of the week.

The volatility plot shows a diminishing rate of market fluctuations which has now touched 0.55% (8.7% annualised) but the curve is now looking quite stable even if the very last part is slightly downward sloping.

The US dollar was quite strong this week and many currencies depreciated but the low volatility expressed by the market should imply that Euro futures are ready to head north once again and retest the 1.42 zone once again.

The staff of HyperVolatility remains bullish on Euro futures but great attention is needed because we are very close to a 5 months new high and there could be a bit of “sideways play” before a clear break through shows off.

On the other hand, if the market does not return on its previous level we will remain flat and we will reconsider our volatility analysis the next Friday.

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