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Swiss Franc Futures Volatility Forecast (24/07/2011)

Swiss Franc futures had a quite choppy week because the price action has been trading within a narrow range for 5 consecutive days. Specifically, the market opened at 122.4 on Monday, dropped to 121.3 on Tuesday, rose to 122.04 on Wednesday, jumped to 122.7 on Thursday and closed at 122.1 on Friday.

The actual volatility is 0.61% (9.6% annualised) and the TGARCH graph is showing a very stable volatility curve which is characterised, at least in the very last part, by a great smoothness and by the total absence of short term choppiness although it is sensibly upward sloping.

It is important to point out that Swiss Franc futures are now very close to the 123 level which has been tested only twice over the last 2 years and has never been violated. In fact, although we had 2 days whose closing prices were around 123.04 – 123.05, the volume was absolutely ridiculous and futures prices got immediately dragged down.

The steadiness of the volatility curve should not be necessarily interpreted as a bullish signal because, in this case, the flattening of the market fluctuations rate is a direct consequence of a price action trading within a narrow range.

The HyperVolatility team is bearish Swiss Franc futures because the resistance point will be violated solely if strong macroeconomics news will come along. Additionally, the volatility curve should experience some short term movements which could favour a drop in futures prices towards the 120.5 – 121 area by the next Friday.

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