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Japanese Yen Futures Volatility Forecast (13/12/2010)

The last week we were expecting a further down movement of Yen futures and so it was. However, prices managed to remain in the 118 area without breaking through this level meaning that the market could have touched the bottom.

The TGARCH volatility touched 1% (15.8% annualised) but it suddenly dropped back to 0.6% (9.5% annualised) which appears to be the constant level of volatility this market tends to revert to. In fact, over the last 5 months every up or down move was counterbalanced by a pullback which “restored” the initial equilibrium conditions.

Consequently, the Yen futures could start moving upward now rather than continuing the downtrend since the volatility should remain stable around this level. However, a very short term drop could push prices down in the 117.5 area but the bullish movement should prevail during the week

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