Swiss Franc Futures Volatility Forecast (27/06/2011)

Macroeconomics news is what is leading financial markets and the great uncertainty that hit both the equity Indices and the crude oil pushed many investors to find a sweet spot in the Swiss currency.

The volatility is now 0.69% (10.9% annualised) and the TGARCH curve is clearly trading within a very narrow range which seems to indicate that the rise in price occurred the last week was fairly robust.

On the other hand, many investors are concerned about the actual level of Swiss Franc futures because the 120 threshold has been touched several times, but never successfully violated, since the first week of June.

Although this market is considered to be a safe haven during high volatile periods in the equity markets some people could reconsider the robustness of their long position because when futures prices get close to this level they first move sideways for a while and then retrace.

The HyperVolatility team remains bearish Swiss Franc futures because the resistance point placed at 120 is a fairly strong psychological point and the conditional variance, which is very flat at the moment, could easily augment implying a drop of futures prices in the 117 – 117.5 area by Friday.

However, should the volatility remain stable we could evaluate the possibility to enter some longs but before doing so we will wait for the price action to break decisively through the 120 threshold.

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