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.

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