Japanese Yen Futures Volatility Forecast (03/04/2011)

The last week we forecasted a market drop in the 121.5 – 122 area but our bearish view on Japanese Yen futures proved even more profitable because the closing price touched 119.

The actual volatility is 0.38% – 0.4% (6% – 6.3% annualised) and it is now fluctuating around the equilibrium point although the right hand part of the chart still shows an upward sloping curve.

However, the sharp drop that brought volatility soon back into its balance level should clearly imply that investors changed their views about the market and that the Japan’s concerns are “almost” over. In addition, the fast decline of Yen futures did not make the volatility rise and this is clearly highlighting the fact that the down move is probably over and that the Japanese currency will soon depreciate against the US dollar.

Consequently, the market could experience a bit of a sideways movement in the first half of the week but Japanese Yen futures should get back to 123 – 124 by the next Friday.

The staff of HyperVolatility will place some long positions as soon as the market will show some evidence of recovery but a stable volatility movement in the first 2 trading days should be a robust signal for a buy and hold strategy.

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