Swiss Franc Futures Volatility Forecast (21/06/2011)

Swiss Franc futures plummeted even more than what we forecasted one week ago, making our analysis even more profitable and precise. The price was at 119 on Monday but it suddenly plunged to 117.3 on Wednesday and remained in this area until the end of week because 117.84 and 117.89 have been the last price prints on Thursday and Friday respectively.

The actual volatility is 0.6% (9.5% in annual terms) but the TGARCH curve is visibly upward sloping highlighting that the next hours could bring more price fluctuations and therefore uncertainty.

The Swiss Franc is unlikely to retest the 120 threshold and the augment in the conditional variance is more statistically probable than an ulterior drop.

Also, if we consider that the US dollar has been depreciating against the Swiss currency for almost 6 consecutive months it is reasonable to assume that the macro-trend will tend to continue over the next hours but the increase in volatility could provoke a short term retracement.

The HyperVolatility team is moderately bearish Swiss Franc futures although we reckon that a sideways movement of the market could be the predominant characteristic of this week.

Specifically, the volatility should rise and drag futures prices back in the 116 area by Friday, although the drop should not be violent, and a continued lateral movement of the price should be the main weekly “trend”.

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