EUR/USD Futures Volatility Forecast (17/10/2010)

The recent fluctuations that the Euro FX market had in Chicago seems to suggest a sudden change of direction.

The TGARCH volatility is not in a steady downtrend anymore but it started to jump up and down and it appears that a movement towards the 1 % level is on the way. An augment in volatility will  probably signify a downward movement of the market which will inevitably lead to an appreciation of the US dollar against the euro.

However, the next weeks will surely show a great battle between bears and bulls. Particularly interesting is the intervention of the Chinese government which is trying to buy more US dollars in order to keep its export competitive and therefore caution is needed in this market which is tremendously extended and likely to experience a retracement.

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