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Swiss Franc Futures Volatility Forecast (30/08/2011)

Swiss Franc futures opened at 126.6 on Monday, dropped to 126.3 on Tuesday, plunged to 125.9 on Wednesday, settled at 126.1 on Thursday but closed at 124 on Friday.

The actual volatility is 0.9% (14.2% annualised) and the TGARCH plot is now showing a fairly stable volatility curve which almost completed its mean reverting journey towards the 0.65% – 0.7% threshold (10.3% – 11.1% in annual terms). The big spike in the conditional variance has been caused by the massive buying pressure which hit the Swiss currency during the sell-off in equity markets and the volatility is now moving following an inverted leverage effect implying that an ulterior softening of the oscillation rate could accompany a slow decrease in Swiss Franc futures prices.

The HyperVolatility team is bearish this market because the symmetry between the price action and its volatility is likely to continue over the next trading hours implying a down move of futures prices which could potentially touch the 120 support level before Friday.

However, it is worth reminding that a great deal of macro news is going to be released between Thursday and Friday and should the data be bearish Swiss Franc futures could jump back up again and eventually retest the 130 threshold before the end of the week.

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