Japanese Yen Futures Volatility Forecast (23/01/2011)

The futures on Japanese Yen managed to remain at a high level even if the volatility increased and the augment in market fluctuations was expected to be much higher and violent.

The current volatility is 0.51% (8.1% annualised) and it is clearly in the equilibrium range. The last week we were expecting a spike in the 0.7% area (11.1% annualised) but the market managed to stay almost at the same level.

However, the recent sideways movement we saw over the last 2-3 weeks and the frequent spikes in volatility both signal that something has changed and that a reverse in the price action is about to occur.

On the other hand, the volatility is stable and therefore it is reasonable to expect the price to rise over the upcoming days even if the rally should not be consistent. Furthermore, on Tuesday the Bank of Japan will set the new interest rate level and an unexpected reading could change the situation in a matter of a few minutes.

The staff of HyperVolatility remains bearish in the long term because the rally is about to end but it is moderately bullish in the very short run and therefore advises you to buy some lots over the next days but to sell them back by Friday evening.

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