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Swiss Franc Futures Volatility Forecast (10/05/2011)

We were expecting a further augment of Swiss Franc futures but the net increase in volatility, which is clearly identifiable at the end of the chart, pushed prices down. In particular, the first half of the week saw a rising price which achieved the 116 level but, on Thursday, futures headed south and touched 114.8 whilst 113.8 was the Friday’s closing.

The actual volatility is 0.73% (11.5% annualised) and the curve is obviously signalling an ulterior raise of the conditional variance which would inevitable drag Swiss Franc futures in the 112 – 112.5 area.

On the other hand, it is important to point out that the drop we saw the last week has been mainly caused by the violent appreciation of the dollar against the euro and other European currencies. Therefore, it will be crucial monitoring the American currency throughout the upcoming days in order to avoid as unwanted as unpleasant surprises.

The HyperVolatility team remains bullish on this market because we believe that the volatility will now mean revert towards the 0.6% level (9.5% in annual terms) whilst futures prices should head north once again and retest the 116 – 116.5 area by the next Friday.

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