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Swiss Franc Futures Volatility Forecast (19/09/2011)

Swiss Franc futures opened at 113.4 on Monday, rose to 113.6 on Tuesday, jumped to 114.1 onWednesday, achieved 115 on Thursday and settled at 114 on Friday.

The actual volatility is 0.81% (12.8% in annual terms) and the chart is manifestly signalling that the Swiss Bank intervention managed to prevent its currency from appreciaitng too much. However, the big drop in market fluctuations has been followed by a sideways movement of  the conditional variance whose curve is now slightly upward sloping but the situation is likely to remain so even during the next hours.

The intervention of the Swiss National Bank “distorted” the price action and the massive drop in price scared away many investors which are now reluctant to place large buy orders although the Swiss Franc stadily remains one of sa havens during equity market turmoils.

The HyperVolatility team is moderately bullish on Swiss Franc futures because a short term increase of the price is likely to occur even though there is a high probability of sideways movements. Hence, we believe that the 115 -116 threshold will be retested before Friday but a break through this level is quite unlikely because the concerns about an ulterior interference of the Swiss monetary authority would augment.

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