Euro Futures Volatility Forecast (27/06/2011)

Euro futures opened at 1.4269 on Monday, rallied to 1.4368  on Tuesday, dropped to 1.4309 on Wednesday and kept decreasing for the remaining days, in fact, 1.4223 and 1.4149 were the closing prices on Thursday and Friday respectively.

Needless to say that the drop in the price has been primarily caused by the announcement of macroeconomics news which came below market expectation causing panic in the equity markets and a consequent appreciation of the US dollar against the Single currency.

The actual volatility is 0.69% (10.9% annualised) and the TGARCH curve, although moving within a narrow range and close to its equilibrium level, is now signalling a potential increase of the conditional variance over the next hours.

The HyperVolatility team is bearish Euro futures, at least in the short term, because the volatility is likely to augment over the next days whilst the price should retest the support placed in the 1.3990 – 1.4000 area by Friday.

Nevertheless, should the price be hit by ulterior macroeconomics news, that have been twisting many markets over the last 3 weeks, we will close out our short positions and step aside because panic is still the predominant feelings amongst many investors and traders.


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