Monday, June 26, 2017

EUA Dec17: Market expects progress in trilogue on Tuesday

Although the supply of allowances increased by more than 70% in a weekly comparison, the benchmark carbon contract only hit a new monthly low at 4.83 euro last week, but it finished with just a marginal loss of 0.20%.
As the season of daily auctions restarted, the EUA Dec17 fell to a daily minimum at 4.85 euro on Monday, a level not seen since 24 May. The carbon market had a negative start to the day, but recovered later during the day as the energy mix turned green and the cover ratio of the auction was above the June average. In a spectacular rally in the afternoon the price hit an intraday maximum at 5.01 euro, but was not able to stay above the 5 euro level. Due to the sell-off in the last 10 minutes of trading the price fell to 4.93 euro. The benchmark contract still finished the day with a gain of 5 cents (1.0%). The traded volume was above 10 million, for the first time since last Monday.
After a positive start the EUA Dec17 climbed continuously until early afternoon on Tuesday. The price hit an intraday high at 5.05 euro, before falling back below the 5.00 euro level. The Fibonacci level at 4.90 euro proved a good support and the price turned higher before the end of trading too. The closing price of 4.95 euro represents a daily gains of 2 cents (+0.4% d/d).
The EUA Dec17 had a weak start to Wednesday opening with a 6 cents gap down. The price was still able to jump to a daily maximum at 5.01 euro in the morning, but after a hesitation around 4.99/5.00 euro the price turned lower in the afternoon. Pressured by a weak energy mix, the benchmark carbon contract fell to a daily low of 4.87 euro in the last minutes of trading and was not able to recover by the end of the day. The price closed at 4.88 euro, a loss of 7 cents or 1.4%. The trading volume, on the other hand, was the highest this week as yesterday was the expiry day of the June options.
The benchmark carbon contract moved sideway in a narrow range before Thursday’s auction, but after the auction cleared with an above average discount, to the price well to a new weekly low at 4.83 euro, a level not seen since 24 May. By the end of the day the price only could climb 3 cents higher, losing 2 cents in a daily comparison.
The daily trading range shrank further to 8 cents on Friday. After opening one cent below Thursday’s settlement price the previous daily maximum t 4,93 euro was retested, but only 1 cent could be kept from the gains.
The price slips slowly lower, it fell already below the most important moving averages and gets away from the 5 euro level. Although most of the technical indicators are not providing any special signal (the MACD still above the zero line and the relative strength index at 48), the Bollinger bands are narrowing, but other technical indicators do not provide any new technical signal. 
The auction supply decreases a little bit this week as the UK auction on Wednesday offers some 0.6 million EUAs less than the Polish auction last Wednesday. 
Market participants will also keep an eye on the second trilogue meeting on Tuesday. Since the European Parliament and the Council adopted their official positions about the reform  of the EU ETS in February, practically nothing happened to the file. The first trilogue in April did not bring any results and the second meeting end of May was cancelled. 
The meeting on Tuesday will be the first "test" of the ambitiousness of the new rapporteur of the file, Julie Girling. Any progress on the file could have a positive effect on the EUA price as market participants would like to see future uncertainties about the market eliminated as soon as possible.
Due to the above we expect the benchmark carbon contract to move between 4.67 euro (a Fibonacci level and also a support in January and in spring) and the 5.00 euro levels.




Source: Bloomberg, ICE

Monday, June 19, 2017

EUA Dec17: Auction supply jumps after three weeks of price declines

Despite the reduced auction supply, last week was the third in a row when the benchmark carbon contract slipped lower.
The EUA Dec17 started the week flat to previous Friday’s settlement price. After a strong auction result, the price retested Friday’s maximum at 5.10 euro, but turned sharply lower in the afternoon. For some minutes it seemed that the 20DMA at 4.95 euro was able to keep the price from falling further, but in the last hour of trading the price plummeted to a daily minimum at 4.91 euro and was not able to recover by the time the market closed. The contract finished the day 2.4% lower, at 4.92 euro, just 1 cent above the daily minimum. The traded volume of 10.6 million was slightly higher than the June average of 9.5 million. The sell-off pushed the price to the lower edge of the increasing trend channel that has been established in the second half of May.
The EUA Dec17 rose for the first time in three days on Tuesday as auction supply dried and the energy mix was strong. Although the price fell below the 20DMA during the day, it managed to recover by the end of trading. The price finished the day at 5.01 euro, a gain of 1.8%.
As all financial markets were waiting for the next rate hike by the US Federal Reserve, the carbon price moved in a narrow range of 8 cents most of Wednesday. After the publication of the US crude oil inventory data, however, the price of Brent turned 3% lower and the carbon price followed suit. The EUA Dec17 hit a daily minimum at 4.90 euro, and was not able to climb back above the 5.00 euro level by the end of the day. The close below the 5 euro level and the 20DMA, and the bearish engulfing from the last two days were warning signals that the carbon price might fall further.
Most of the market participants were on holiday on Thursday, which had an impact on the traded range and volume of EUAs. The price moved in a narrow range and not even 7 million allowances traded in the benchmark contract. The price closed with a marginal gain of 2 cents as the positive effect of the lack of auctions was mainly cancelled by the weak energy mix.
The EUA Dec17 opened with a 2 cents gap down on Friday and still tried to retest the 5 euro level (also the 20DMA) in the morning. Fears about the increasing auction supply, however, pushed the price down continuously in the afternoon. The benchmark contract finished the week at 4.88 euro, a daily and weekly minimum and a level not seen since 7 June. 
The increasing auction supply started to weigh on the price last week already and the negative effect might continue this week as well. 
The deteriorating German clean dark spread is another factor having a negative impact on carbon prices.
The factors mentioned above pushed the price of the EUA Dec17 below the 5.00 euro level which is currently also the 20DMA and the 30DMA at 4.85 euro is quite easy to reach. The next support is the lower Bollinger band at 4.77 euro, followed by a Fibonacci level at 4.70 euro and a local low from March at 4.58 euro.
On the other hand, the RSI is in neutral territory and the MACD still in the positive territory. Should the price be able to consolidate or recover, the first resistance is the 5.00 euro level, followed by the 200DMA at 5.12 euro.


 Source: Bloomberg, ICE

Monday, June 12, 2017

EUA Dec17: Consolidation near the 5 euro level expected

The benchmark contract declined by an additional 2.3% last week.
On Monday when there were no EUA auctions, the EUA Dec17 hit a new 3-month high at 5.8 euro. The traded volume of 5.3 million allowances, however was well below the daily average for May because of a public holiday in many European countries.
The EUA Dec17 opened flat on Tuesday and remained relatively stable in the morning. The weak energy mix, however, pushed the benchmark carbon contract lower in the afternoon. The decline accelerated when the price fell below the 200DMA first, and then below the 5.00 euro level. The price hit a daily minimum at 4.93 euro, and was not able to recover by the end of the day. The contract settled at 4.97 euro, a loss of 20 cents (-3.9% d/d).
Although the benchmark carbon contract opened flat on Wednesday, it closed the day with a loss of 1.8%. In the morning the price still tried to climb back above 5 euro and reached a daily maximum at 5.04 euro, but the unexpected increase in the US crude oil inventories that pushed down oil and gas prices had a negative effect on the carbon price as well. It fell to a daily minimum of 4.87 euro, and was not able to recover by the end of the day. The closing price at 4.88 euro was the lowest since 23 May.
Starting from the 20DMA, the EUA Dec17 opened with a 2 cents gap up on Thursday and the gap has not been filled during the day which means that it will serve as a support. Thanks to the strong auction and the rally in German power prices the price broke above the 5.00 euro level and did not stop until 5.18 euro. The contract was not able to keep all its gains and closed at 5.05 euro, 3.5% above Wednesday’s settlement price.
The CO2 price moved in a narrow range of 10 cents on Friday. After opening at 5.05 euro, the price slipped 5 cents down, then climbed back and increased 5 cents. By the end of the day it returned to its opening level, producing a doji candle, a sign of uncertainty.
Most of the technical indicators suggest a consolidation to be expected in the next days. The relative strength index is at 53, and the allowances trade near the mid-Bollinger band. The lack of auction son Thursday (bank holiday in Germany) and on Friday (bridging) might support the price this week. 
The MACD, however, slipped below the signal curve on Friday, warning about the weakness of the price.
All in all, we expect the price of allowances to consolidate near the 5 euro level this week. 
Supports are seen at 4.96 euro (20DMA), at 4.95 euro (a Fibonacci level) and at 4.85 euro (lical low from February).
The first resistance is the 200DMA at 5.10 euro, followed by a Fibonacci level at 5.15 euro and the June high at 5.28 euro.


Source: Bloomberg, ICE

Sunday, June 4, 2017

EUA Dec17: Consolidation above the 5 euro level

With many traders on holidays due to the spring bank holiday, the EUA Dec17 remained stable on the first trading day of the week. The contract traded in a range of 9 cents. Although the price fell to a daily minimum at 5.13 euro, it remained above the 200DMA and was also able to recover to close at 5.17 euro (-0.4% d/d). Despite the loss the 20DMA climbed above the 30DMA on Monday, a positive signal.
The delay of the political negotiations and the restart of the daily auctions pushed down the price of the EUA Dec17 in the first half of the day on Tuesday to hit a daily minimum at 5.09 euro. The recovery in the afternoon was short lived and the contract closed at 5.14 euro, a loss of 3 cents or 0.6% in a daily comparison.
The benchmark carbon contract was relatively stable in Wednesday’s opening, but started to decline slowly after the auction. The movement accelerated in the last hour of trading, when the price fell below the 200DMA and the 5.00 euro level. The price was not able to recover and finished the day at 4.98 euro, a loss of 16 cents or 3.1%. 
The EUA Dec17 opened flat on Thursday and increased continuously during the day. The gains accelerated after the strong auction and the price hit a daily maximum at 5.14 euro. By the end of the day the price retreated slightly to close at 5.08 euro, a gain of 10 cents or 2.0%. The fact that the price managed to climb back above 5.00 euro was a positive fact.
Disappointment about the decision of the US President pushed the price of the EUA Dec17 below 5.00 euro  Friday morning again, but the commitment of the climate commissioner and the German Chancellor to the accord brought back investors’ confidence in the EU ETS, the Union’s main tool to achieve its emission reduction goals. The benchmark contract hit a daily maximum at 5.20 euro (the gains were halted by the local maximum at 5.22 euro) and closed the day 1.6% higher.
In the last 6-7 trading days the 5.00 euro level proved a good support. Should the slightly higher auction supply or a disappointing UK election result push the price lower, the next support is a Fibonacci level at 4.70 euro. To the upside, the 5.22 euro level is the first resistance to break, followed by a Fibonacci level at 5.30 euro and a local high from 5.47 euro.




Source: Thomson Reuters, ICE

Monday, May 29, 2017

EUA Dec17: Lack of auctions and higher power prices lifted the price above 5 euro

With only three auctions and the German front year power price climbing back above 30 EUR / MWh, the benchmark carbon contract was able to climb above 5 euro again.
The EUA Dec17 opened with a 6 cents gap up on the first trading day of the week. The strong auction lifted the price to a new 1-month high at 5.00 euro in the afternoon. After retreating from the daily maximum, the price closed at 4.91 euro, forming a doji candle that signals indecision of the market which direction to take.
After Monday’s doji candle, the EUA Dec17 opened with a 4 cents gap down on Tuesday, but it was able to hit a daily maximum at 4.96 euro during the day. An attempt to break above the 5.00 euro level, however, failed. In the last two hours of trading bears invaded the trading floor and pushed the price sharply lower. The benchmark contract fell to a daily minimum at 4.72 euro and was not able to recover by the time the market closed. It settled at 4.75 euro, a loss of 3.3% in a daily comparison. The traded volume of 18.3 million in the Dec17 contract was the highest since the last trading day of April (the compliance deadline). Despite the negative day, the MACD has been lifted above the zero line which is a bullish signal.
The benchmark carbon contract opened flat on Wednesday, and slipped just one cent down, before it started rallying towards 5 euro again. The price hit an intra-day maximum at 4.94 euro, and remained above 4.90 euro until the market closed (+3.2%).
Supported by the lack of auctions, EU carbon allowances rose for the 7th time in 8 days on Thursday, trading near the 1-month high reached earlier last week. After some initial hesitation, the price climbed continuously higher to hit the 5.00 euro level for the second time after Monday. Gains were kept until the last minutes of trade and the benchmark carbon contract closed at 4.98 euro, a gain of 1.4% in a daily comparison. The volume, however, was extremely low at 5.6 million compared to the 11-18 million in the three first trading days of the week due to a public holiday in many European countries.
After a strong opening the price did not hesitate long and it climbed to reach a new monthly high at 5.19 euro (last seen 7 April) on Friday. The price broke above the 200DMA at 5.08 euro as well. The contract settled at the daily maximum, with a gain of 19 cents or 4.2% from Thursday’s settlement price. 
In the last two weeks, when the price left the declining trend channel and the MACD climbed above the zero line, the technical picture got rosier. 
The two warning signals are, however, that the price trades above the upper Bollinger band and the relative strength index is approaching the overbought territory. 
In addition, auction supply increases by 29% in a weekly comparison and the dark spread also turned lower last week.
We therefore have a balanced view on the price and expect the EUA Dec17 to move between 4.70 and 5.45 euro this week.



Source: Bloomberg, ICE