Tuesday, May 29, 2012

EURUSD: Take a break…

The EURUSD not just reached the 1.26 level foreseen by us on 4 May, but – with a hasty movement - it went until 1.25. Now it seems to take a break as polls show that New Democracy, the pro-bailout party of Greece might win the elections to be held June 17. From the technical analysis point of view the RSI, standing at 20 on Friday, marked an oversold euro and it is still below the critical 30 mark (27 at the time of writing). Moving averages are at light years.
We expect therefore a correction until 1.262 (the MACD is already preparing to turn back higher), as the former support level might work now as resistance. Strong commitment of the leading euro zone countries to save debt burdened peripheral economies might help further until 1.282. An earlier local low and the 20-days moving average can be found here.
On the other side, the main trend shows USD appreciation on the long term and new fears coming from the other side of Southern Europe, namely from Spain might give a new impetus for the EURUSD to continue on the downward slope.

Carbon down on a bearish analysis

Strong energy mix and low volumes helped carbon to reach and break 7.00 euro for a short time during the morning hours yesterday. However it retreated from the highs very quickly as the resistance for yesterday - drawn from a "double bottom" support formed at the end of April - proved to be rather strong.

The correction / slide came also at the time when a leading bank issued its latest EUA price forecast estimating the average price in H2 of 2012 to be @ 6.50 euro (revised down from 9.00 euro). The main reason - according to the analysis -for a lower price is (not surprisingly) the oversupply; carbon units are coming to market from NER sales, from government auctions, from early auctions and there is still plenty of CER and ERU to be used for compliance. And yet the economic growth looks gloomy. Any "set-aside" actions will not affect the supply-demand balance until 2013. The forecast reminded of the downside risks and I believe many of the traders were 'spooked' and decided to limit / close their long positions.

Back to the chart: As 7.00+ euro proved to be too high for carbon and even 6.81 didn't come in as support (actually at the moment acts as a cap), the carbon can look for possible support at 6.61 euro.

Looking at the big picture, the price moved back below the moving averages and with bulls taking now the upper hand we may see the price continue along the trend [see below].

Friday, May 25, 2012

Carbon holds strong

Carbon holds relatively strong, trying to break out from the trend, which could possibly trigger Stop Losses. It receives support from still relatively cheap coal and stronger energy and Brent prices. However anything below 7.02 euro for Dec12 (Fibonacci resistance level) doesn't signal change of the trend. So far the price is rangebound between 6.63 - 7.02. Open interest built up in the last two weeks by some 6m units on Dec12 and 2m units on Dec13 (most likely power hedging).

EURUSD on its knees again and we believe if it wasn't for the attractive dark spread [energy price - coal price] (and the hanging possibility of the set-aside), carbon would be trading much lower.


Next week, there is a CarbonExpo conference in Cologne and we imagine the trading activity to be subdued, as many participants will attend. We will be there as well, feel free to stop by our stand and chat about the market and what we can do for you!

Tuesday, May 22, 2012

Carbon strong ahead of EU summit

Carbon showed some strenght last night breaking above short term resistance levels (short term Moving Averages) and trend lines. See chart below.

This morning the rally continued as stop losses were triggered. Current levels would indicate an overbought market - RSI @ 70, which implies a correction.

However, current levels of 6.80 euro are also Fibo level, which can act as support. At this moment we can say 6.80 passed the "support test" and we can look towards 7.02 - next Fibo level. On the way to get us there we have 20 day moving average @ 6.94 euro (black line on the chart below), which can temporarily halt the rally. Plus the OECD cut its growth forecasts for the Eurozone a couple of minutes ago. (To -0.1% from +0.2% in 2012)

Wonder if the rally and strenght have something to do with the Commission adopting rules on national support for industry electricity costs in context of the EU Emission Trading Scheme ... please read below


Monday, May 21, 2012

What affect carbon this week

Carbon prices have been range bound for 2 weeks now receiving support from low coal prices (coal price is currently at the levels last seen around October 2010 - see charts below).

6.40 euro proves to be support; however the chart is far from looking bullish. Technical indicators like MACD and 20-days moving average falling below the 30-days moving average enforce our view of a possible downside. RSI at 40 doesn’t indicate oversold market either.

This week we will have important monthly and quarterly macroeconomic data published for France, Germany and Italy. Also we will have an unofficial EU summit, which should continue to discuss topics started during the G8 summit:
- how to tackle the economic crisis - incentivise economic growth via spending or cut deficit with austerity measures (new French approach vs. strict German view),
- whether Greece should stay in Eurozone - G8 was positive on this and supportive of Euro - however German Central Bank warned other central banks about their exposure to Greece in the light of the country leaving Eurozone, and mixed signals from Greece ahead of new elections in June,
- perhaps the idea of Eurobonds - rejected by Merkel - will come back to the table being more possible than ever (mind last year Greece leaving Eurozone was unheard-of and now it seems no more a taboo)

In the lack of news directly affecting the carbon market - set-aside and change in auction schedule - all the above may have significant impact on carbon as well. Short - term we don’t expect any significant price movement either way - view on the downside risk remains as in the previous post. Uncertainty over Greece, Spain and the euro zone were likely halt any rebound.

Wednesday, May 16, 2012

Are we heading towards historical low ?

Carbon was moving in a range 6.80 - 6.60 euro last week however it was lacking the momentum or drivers to go either up or down. Yesterday we broke below 6.61 which was (approx.) Fibonacci level and this opened the way to the downside, continuaiton of which we saw this morning - price hit 6.30 euro.

6.37 is another Fibonacci level which gives certain support so far. Low trading volume (most of the volume today was in my assumption automatic trading Stop Loss) can make the market more volatile and more sensitive to the actions of few players taking the advantage and giving the direction. We had an opening gap (yesterday close 6.57 euro -- today opening 6.50 euro) and the market may try to close this gap -- meaning that the price may go back to 6.60 level where it meets the previous support now being a resistance or will be tested for resistance.

Looking at the bigger picture 6.41 euro was the level from which the first quarter rally started, which can be supportive. RSI is also close to 30 which should in theory point to an oversold market - yet another supportive factor. However something tells me the market will more likey slide towards 6.00 euro and we will see if traders and compliance buyers will buy at the "double bottom" formation.

Monday, May 7, 2012

While UK is on holidays and France cheers for new president ...

Change of the president in France - which definitely puts a question mark on the continuation of the German-Franco (Merkel - Sarkozy) tandem - had its reflection in the EURUSD rate and the EUA price as well.

We continued falling thru 6.62 and found a support only @ 6.45 euro - a level which started the April bull run after double bottom @ 6.00 euro. Previous support @ 6.81 is now a resistance.

With the long-anticipated transition to the Union registry (
and all the worries, difficulties and obstacles ahead) and - lets be honest here - the deadline for it coming back online being really uncertain (despite the EC commitment to 20 June) I can imagine more sellers closing spot sales before the national registries goes off line at the beginning of June which can put - yet additional - pressure on the price.

Friday, May 4, 2012

What May happen

The market lacked the momentum to push forward; 7.60-7.65 proved to be strong resistance plus lack of support from coal and power market took away the obvious buying interest from power companies.

Any long position should have been closed latest @ 7.35 - before the market lost the ground yesterday after breaking this level when the US market opened without optimism. Stop Loss were taken out here.

Further short signal was the break below 7.07 - recent support and double bottom level. At the moment market finds support @ 6.80 euro - which is the level from previous significant correction and a Fibonacci level (twice: 1. on a daily chart, 2. on a 1hr chart).

I imagined the market prices moving within 7.24 - 6.80 today, however we dont exclude further downside risk in the late afternoon - depending on the US market mood - we may see a sell-off again leading to pull back to at least 6.62 euro.
EUR/USD: Let's bet for the dollar

Although the first days of this week were bank holiday in many European countries, the appreciation of the US dollar compared to the Euro (from 1.3255 last Friday to 1.3137 at the time of writing) cannot be left out of consideration. There are couple of reasons behind this movement:

-          Disappointing macro data (from US job market, EU purchasing manager index etc.) pushed investors towards a risk-off mood.

-          Spanish government bond yields were pushed high again by comments about the banking sector struggling with record non-performing loan (NPL) ratios.

-          Additionally, focus in Europe is shifted nowadays more towards local politics. There will be parliamentary elections in Greece this Sunday, but more importantly France is expected to elect a new president on Sunday. The hopes that Nicolas Sarkozy would be re-elected are very weak. The socialist frontrunner Francois Hollande - having vast majority - emphasised, however, several times that he considers re-negotiating former agreements about European bailout absolutely necessary. This causes serious worry on the market.

All this supports our view that the EUR/USD might reach 1.3 level again soon. Actually it tested it three times from February 2012, therefore the support becomes weaker and weaker. In the case of a significant US dollar appreciation, we could see 1.26 again. In the less likely scenario of a Euro appreciation, the first resistance level can be found at 1.34.

Tuesday, May 1, 2012

After compliance

By now all the installations covered by the EU ETS should have surrendered the units for compliance. We have been quiet on our blog in April - but we were very busy trading with and for our clients so that their compliance needs are met - buying the shortage, selling the surpuls and swapping EUA for CER/ERU and cashing in the spread premium.

April indeed was interesting month and many technical signals were produced, which could have led to a profitable trades. Here are some of them...

1. (above) Double bottom @ 6.00 euro - those with high risk apetite could have entered long @ around 6.35 euro (SL 6.20 or even 6.00), this less risk hungry could have entered long @ the break of 6.50 euro (SL 6.35 euro),

2. Continue long - adjusting SL (trailing SL) - you could also add to long position @ 6.76 euro , 7.07 euro and your SL would be triggered on the correction from 7.35 to 6.95 - if no Profit Take target, then the SL should be @ 7.07

3. (above) We see further the market didnt drop below 6.82 - a Fib level, which a long signal again. Enter long @ 7.00 euro with SL somewhere @ 6.75 - aggresive --

4. 7.02 support is confirmed (if you had a Profit Target it should be set @ 7.35 you would sell there)

5. We entered new April high and I believe all your lenght should have been sold here - If not you should have SL @ 7.20 - which is kicked.

6. We have another double bottom @ 7.06 and an entry signal to go long latest @ 7.20 euro - which would lead us to where we are at the moment.

7. (above) On the big picture i have left a resistance line @ 7.55, which coincides with 45 day MA (support from 15 day MA). 7.80 is " Fibonacci level " with possible further gains to 8.23.

Now given the fact that market closed yesterday above 7.41 - Fib support - we see good chance it will go up towards 7.80 and higher.