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Euro Futures Volatility Forecast (18/04/2011)

The HyperVolatility team was right once again!!! The Swiss Franc futures prices rose to 112 whilst our expectations were around the 110.5 – 111 area and therefore our forecast earned our readers higher than expected profits.

The current volatility is around 0.64% (10.1% annualised) but the TGARCH curve is once again fluctuating within the equilibrium point although the right hand part of the chart is displaying an upward sloping curve.

Swiss franc futures should keep raising, even if we reckon that a short term retracement is on its way, and it would not be surprising to see a sideways movement of the market once the 112.5 – 112.7 area gets hit.

Specifically, the uptrend that characterised this market remained stable for several months meaning that many investors are still using the Swiss currency to protect their portfolios but a short term drop accompanied by an increasing volatility is not an eventuality to opt out. However, the plummet in price would be predominantly due to the will of some investors to bank in the great profits accrued so far.

Having said that, the HyperVolatility team remains moderately bullish on this market and we believe that, should the volatility remain stable around the current level, futures prices could achieve the 112.5 zone. Nevertheless, the higher the market goes the weaker the price action becomes and therefore our long positions will be protected by tight stops but should the conditional variance curve touch 0.7% (11.1% in annual terms) we would probably start looking for short opportunities.

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