Swiss Franc Futures Volatility Forecast (02/08/2011)

Swiss Franc futures opened at 124.1 on Monday, moved to 124.8 on Tuesday, settled at 124.8 on both Wednesday and Thursday whilst 127.2 was the closing price registered on Friday.

The volatility is now 0.6% (9.5% annualised) and the TGARCH plot is displaying an upward sloping curve which seems to have completed its mean reverting process. The volatility of the Swiss Franc is trading within its long term equilibrium point implying that the next trading days will see a softening of the conditional variance and a consequent decrease of the risk associated with unexpected price jumps.

Swiss Franc futures managed to break through the 126 threshold last week and, as mentioned in the British Pound forecasts, the price is now trading in an unknown territory. Specifically, the Swiss currency has never appreciated so much against the US dollar but the need for security attracted many investors towards this market as it always considered being a kind of safe haven during rough waters.

The HyperVolatility team is bearish Swiss Franc futures because a short term retracement accompanied by an increasing volatility should drag the price back down in the 124 area.

Nevertheless, bad macroeconomics news and unexpected events could push investors to protect their portfolios by going long the Swiss currency once again and therefore it is worth watching very closely the economic calendar.

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