Japanese Yen Futures Volatility Forecast (28/06/2011)

The last week we were bullish Japanese Yen futures but we also warned that the great uncertainty surrounding markets could have brought more instability. Also, we clearly stated that should the volatility have surpassed the 0.61% level (9.6% in annual terms) we would have looked for short opportunities and our conditional variance forecast proved extremely accurate and profitable.

The market opened at 124.6 dropped to 124.5 on Wednesday, it decreased to 124.2 on Thursday and it settled at 124.3 on Friday. Specifically, the volatility based entry point was given on Wednesday but we placed our short position on Tuesday because the variance started to augment quite significantly although the market was trading around 124.7: a very nice trade indeed!!!

The current volatility is 0.51% (8.09% annualised) and the TGARCH plot is now suggesting that the upcoming days are going to welcome a softening of the oscillation rate which could favour a short term recovery of the price action.

The HyperVolatility team is moderately bullish on Japanese Yen futures because the decreasing conditional variance and the depreciation of the US dollar should back the price which is probably going to retest the 125 area by Friday.

Nevertheless, a large sideways movement could be a quite probable occurrence because the 125 threshold is a very strong resistance point and this may clearly cause some concerns amongst traders and investors.

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