Tuesday, May 29, 2012

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].

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